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August 31, 2009
Is this actually profit?
The government has taken profits of about $1.4 billion on its investment in Goldman Sachs, $1.3 billion on Morgan Stanley and $414 million on American Express. The five other banks that repaid the government — Northern Trust, Bank of New York Mellon, State Street, U.S. Bancorp and BB&T — each brought in $100 million to $334 million in profit.As Big Banks Repay Bailout Money, U.S. Sees a Profit from the NY Times by Zachery Kouwe.The figure does not include the roughly $35 million the government has earned from 14 smaller banks that have paid back their loans. The government bought shares in these and many other financial companies last fall, when sinking confidence among investors pushed down many bank stocks to just a few dollars a share. As the banks strengthened and became profitable, the government authorized them to pay back the preferred stock, which had been paying quarterly dividends since October.
But the real profit came as banks were permitted to buy back the so-called warrants, whose low fixed price provided a windfall for the government as the shares of the companies soared.
I see how this is a positive return on the money invested. I don't know if this is rightly regarded a profit because of the cost of capital and the risks involved. I'm having trouble putting to words the exact problem here, but a couple of examples should highlight what I mean here.
Let's say that we flip a coin. If heads comes up you pay me a hundred bucks and if tails comes up you pay me back zero. Let's say I pay you $90 to play that game. If heads comes up then I've made a $10 return but still an unwise investment.
Let's say that IBM can borrow money at 10% per year interest when the government can borrow at 5%. The government borrows a billion bucks and turns around and lends it to IBM at 7% interest. At the end of the year IBM repays its loan with the interest. Just because the money repaid exceeded the cost of funds doesn't mean that the government made an economic investment. In risk adjusted terms you've actually lost 3%.
These are really the same example. The premium the market demands for lending to IBM is the cost of losing your money when IBM goes belly up. In the years when IBM doesn't go belly up, the money you make in excess of the return might feel like profit, but you are actually not charging the right amount for it and in expectation you'd lose.
Is this a wedge between how economists and accountants regard profit? Do accountants have concept of risk and inflation adjusted profits?
When the Bush administration made these investments the financial sector was in serious trouble. Even under their fairly punishing terms these were by far the best investments the firms could get. Many of the best firms had raised outside capital earlier in 2008 under similar terms and then things got even worse. There was little sense in the financial or economics communities that these were the appropriate market prices for the financing the banks received given the information markets had at the time. But given that these private funding transactions were shut out by the better ones with the government, I don't know how we'd ever know what the right terms were. Therefore I have no idea how we'd assess if the government really made a sensible investment where the returns justified the cost of capital and risks involved. The article makes some guesses and it doesn't look good for the government:
If private investors had taken a stake in the banks last October on par with the government’s, they would have had profits three times as large — about $12 billion, or 44 percent if tallied on an annual basis, according to Linus Wilson, a finance professor at the University of Louisiana at Lafayette, who analyzed the data for The Times.Why the discrepancy? Finance experts say the government overpaid for the bank assets it bought, because its chief priority was to stabilize the teetering financial system, not to maximize profit.
“Had these banks tried to raise money any other way, they probably would have had to pay quite a bit more than the government received,” said Espen Robak, head of Pluris Valuation Advisors, which analyzes the value of large financial institutions.
A Congressional oversight panel concluded in February that the Treasury paid an average of 34 percent more than the estimated fair value of the assets it received.
And of course, on all those other investments, we seem to be coming up tails:
The government still faces potentially huge long-term losses from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler. The Treasury Department could also take a hit from its guarantees on billions of dollars of toxic mortgages.
Posted by OneEyedMan at 4:35 AM | Comments (0)
August 30, 2009
Bipartisan Reform in Health Care
With the death of Senator Edward Kennedy, the Democrats do not have the votes just among their 57 members (and the two independents) to break a filibuster, and not all of these can be counted on to vote in lock step. If the Democrats want to enact health care reform this year, they appear to have little choice but to adopt a high-risk, go-it-alone, majority-rules strategy.Majority Rule on Health Care Reform. NY Times Editorial BoardMr. Obama should know from sad experience the pitfalls of seeking bipartisan cooperation from a Republican Party that has sloughed off most of its moderates and is dominated by its right wing. His stimulus package was supported by no Republicans in the House and only three Republicans in the Senate, so-called moderates whose support was won by shrinking the package below the size at which it would have done the most good.
Obama could likely insure millions of additional people in the United States in a bipartisan bill, just not all of them. He won't end up insuring all of them anyway, because undocumented workers won't be covered by any plan. The resulting plan may cover every legal immigrant and citizen, but I doubt that too. Instead many will pay fines and buy insurance only when sick, making it many things, but not insurance. Maybe more of an option to buy insurance. The bipartisanship discussion is really a debate over how many people to give up covering in order to win a certain number of Republican votes.
One reason why major social policies like social security, the tax deductability of home mortgage interest, medicaid, welfare, and food stamps enjoy robust support even when they don't work or work poorly is that when initially passed politicians in the right and left benches supported them. Once you start making policies with thin majorities you open yourself up to reversing them as soon as you leave power.
Posted by OneEyedMan at 7:30 AM | Comments (0)
August 29, 2009
Who causes car vs. bike accidents
The BlueEyedGirl and I ride our bikes to campus pretty much every day. We follow a longer but low traffic rout to have a nice sage ride. I've ridden the other way a few times. Though I've never been cursed at or thought like I've been mistreated by motorists, the high speed cars felt unsafe and I was well aware that a small mistake for them would cause huge suffering for me.
It is through this lens that I saw the following post on Freakonomics:
More than 52,000 bicyclists have been killed in bicycle traffic accidents in the U.S. over the 80 years the federal government has been keeping records. When it comes to sharing the road with cars, many people seem to assume that such accidents are usually the cyclist’s fault — a result of reckless or aggressive riding. But an analysis of police reports on 2,752 bike-car accidents in Toronto found that clumsy or inattentive driving by motorists was the cause of 90 percent of these crashes. Among the leading causes: running a stop sign or traffic light, turning into a cyclist’s path, or opening a door on a biker. This shouldn’t come as too big a surprise: motorists cause roughly 75 percent of motorcycle crashes too.Who Causes Cyclists’ Deaths? and a Hat Tip to Anderson at Volokh (Bicyclists, Motorists, and Safety)
One comment that I didn't see in either of the two posts or any of the comments on the relative quantities of drivers and cars. There are easily a hundred of times as many cars as bikes on the roads. If there was no difference in the probability of drivers and bicyclists causing a serious accident, then bicyclists would be at fault in only 1% of car vs. bike accidents. So in that sense, the 90% number is actually unfavorable for bicyclists.
Here is the summary of the study linked to in the article:
What are the Dangers in Terms of Cycling Safety?
It notes two facts which at first seem convincing:
# Accident rates per kilometer are 26 to 48 times higher for bikes than for automobiles.
# U.S. cyclists are three times more likely to be killed than German cyclists and six times more than Dutch cyclists, whether compared per-trip or per-distance traveled .
But say it isn't as bikers claim that drivers don't care about them. Say instead that American bicyclists are more dangerous. That would cause the statistics to fall the same way!
Maybe we need more bike lanes and maybe drivers should pay more attention to pedestrians and bicyclists. However, this article doesn't clearly support such a claim.
Posted by OneEyedMan at 12:45 PM | Comments (0)
Another reason why libertarian isn't the same as pro-business
Toy-makers, clothing manufacturers and other companies selling products for young children are submitting samples to independent laboratories for safety tests. But the nation's largest toy maker, Mattel, isn't being required to do the same.Third-party safety tests not required for MattelThe Consumer Product Safety Commission recently, and quietly, granted Mattel's request to use its own labs for testing that is required under a law Congress passed last summer in the wake of a rash of recalls of toys contaminated by lead. Six of those toys were produced by Mattel Inc., and its subsidiary Fisher-Price.
Large firms often favor increased regulation because their economies of scale make it less of a burden and their skilled lobbyists can often reduce the legislation effects on themselves.
HT: Consumerist.
Posted by OneEyedMan at 10:13 AM | Comments (0)
August 28, 2009
What's the value of moral hazard?
The cost of funds compared with smaller banks has fallen by about from .08% lower to .34% percent lower (Too big to fail fact of the day) since 2007. So before the bailout big banks borrowed at say 3.00% while small ones borrowed at 3.08%. Now big banks borrow at say 2% but small ones are borrowing at 2.34%.
This gives us a way to figure out an estimate of the moral hazard value of making banks too big to fail. There are 22 banks (2 investment and 20 commercial) that have 100 billion or more assets. In total they have about $12 trillion in assets. At .0026% rate subsidy, you get $31 billion subsidy this year in on the $12 trillion. Do the NPV of this stream of subsidies and you get $765 billion, which is serious money.
It is possible that even without the bailouts the small firms would be suffering in the rate markets and so this exaggerates the subsidy. However, a larger fraction of big firms failed than small ones, so I'm dubious that credit markets would favor the large survivors.
It is interesting that our regulator's answer to the problem of having huge national banks whose failure would bring systemic problems was to create even fewer, even larger banks.
To think that some people want the government in charge of healthcare.
Posted by OneEyedMan at 3:51 PM | Comments (0)
August 27, 2009
Jump higher than ever
I for one was surprised to learn that Pittsburgh is the center of the extreme pogo-ing universe. I guess some place has to be.
Boing! Boing! Boing! Boing! Boing! Boing! Boing! 'Extreme' Pogoers Do Backflips, Hop Minivans; In This Sport, Bounces Per Second Matter
Posted by OneEyedMan at 10:38 PM | Comments (0)
August 26, 2009
No subsidies for milk production
In the past year, the price farmers get paid has dropped some 40 percent, to about $1 a gallon, which can be as much as 40 cents a gallon less than it costs to produce milk. ... Recently, the Department of Agriculture announced that it would raise price support levels to help farmers through this crisis, a short-term plan that has been applauded by the New York Congressional delegation.The Dairy QuandaryWe do not like agricultural subsidies or price supports, and we have opposed dairy subsidy programs. ...But there is a special argument to be made in this case.
...
In the Northeast, with farms different from the huge factory dairies found in much of the West, the cost of milk is a land-use question.
...
This kind of dairy is a relatively benign use of the land, a means of protecting open space, a form of stewardship that is more acceptable than most others.
No, absolutely no, subsidies for agricultural production. If you want to ensure open spaces with public funds, do so directly. You should offer dairy farmers money for the development rights on their land. There is no need to indirectly prevent development by propping up milk prices. Down that path lies the permanent corruption of another agricultural industry by the gold of the state.
Posted by OneEyedMan at 7:56 AM | Comments (0)
August 25, 2009
Fact of the day
How was it that the Swiss came to have secrecy laws?
In 1934, Swiss politicians were legislating in response to specific events abroad: a Nazi law that made it a death-penalty crime to hold assets outside the country; a scandal stoked by French socialist politicians over Swiss bank accounts held by prominent citizens. The Swiss looked out and saw a world gone mad: bank failures, depression, militarism, fascism, communism. The new law was meant to buttress the world's confidence in the privacy and security of a Swiss bank account.Does the World Still Need the Swiss? By Holman Jenkins
One of our potential futures is one in which populism runs amok and massive wealth expropriation takes place. If that day comes to pass I hope there are still countries like Switzerland.
Posted by OneEyedMan at 10:45 PM | Comments (0)
Principle at the NY Times
Massachusetts governors used to fill Senate vacancies. But in 2004, the Democratic majority in the State Legislature changed the law to require a special election. The leaders were concerned that if Senator John Kerry was elected president, Gov. Mitt Romney would appoint a fellow Republican. To change back now would look like an unseemly amount of partisanship in setting the rules for who goes to Congress. ... The best solution would be to amend the Constitution to require that all Senate vacancies be filled by election. Senator Russ Feingold, Democrat of Wisconsin, has a proposal, which has bipartisan support, to do that.Replacing Senator Kennedy
This is a good suggestion. It is also helpful to solve the government continuity problem. Without a mechanism to replace senators by election, if enough senators are killed and the people who decide their replacements are killed, then the government can't do anything until they are replaced to make quorum. Voting for replacements if the current office holder died would ensure that even the worst interruption of government wouldn't last longer than a few months.
Posted by OneEyedMan at 9:51 AM | Comments (0)
Understanding arguments against peak oil
‘Peak Oil’ Is a Waste of Energy By Michael Lynch lays out they basic arguments against peak oil. In short, we are finding more oil than some of the basic statistics indicates, political instability has always been a problem we've been able to work around. He omits that higher oil prices will encourage the development of more efficient and extreme extraction technology, but I thought the piece was a good introduction to the subject.
Posted by OneEyedMan at 8:31 AM | Comments (0)
Has the burden of proof for justifying the banking bailouts been met?
The FT, Tyler Cowen, and Megan Mcardle are saying that we may make a small amount of profit or lose very little on on the banking bailouts. Arnold Kling says that this would make him revisit his beliefs about whether they were really bailouts or just liquidity interventions. A profit on the bailouts would also change my perspective on them. Alas, the holes are sufficiently huge in aggregate that this is pretty unlikely even if several do. I also want the opportunity cost of capital counted in any such reckoning.
They are demanding critics of the bailouts propose an alternative:
McArdle says
That said, they were probably the best thing we could have done. If you disagree, you need to sketch out a plausible alternative scenario.
Cowen says
Maybe you think that the bailouts will have disastrous long-run consequences. And maybe they will, I worry about this too. But if anyone should know that modern politics can only stand so much short-run panic, it is libertarians and fans of Bryan Caplan's book. If we had not done the bailouts we did, we would, within a few months' or weeks' time have received a much worse and costlier bailout run by Congress and Nancy Pelosi. How does that sound?
I'd be against those too. It is too easy to be seduced into supporting bad policy because not doing something could eventually trigger an even worse one.
In the long run it would have been better to allow the entire financial system to burn to the ground then bail out the people who made these mistakes.
If you absolutely positively had to invest a trillion dollars in the financial system, it would have been better to summon solvent banking firms to NYC and hold Dutch auctions for their assets and liabilities. That is, who wants AIG plus a subsidy, and the subsidy increases (price drops) until the bank sells. No reward for failure. One could also have done a massive capital injection into the solvent banks at favorable enough rates that all would want to participate. One way to force the management to put their money where their mouths are is to require management to inject their own (outside) money into the new firms at some leverage ratio. Even if they have to borrow it against everything they have.
You could also try huge quantitative easing. If the federal reserve had done a trillion dollars worth of open market operations and driving real rates negative and injecting massive amounts of liquidity into the system, then I believe that market mechanisms could have been leveraged to restart lending if it failed.
Finally, how about investing in the publicly traded companies directly. Put substantial orders in to buy new equity in the 3000 largest publicly traded firms that can be sold at any time. Make these shares assets of the FDIC or assets deposited as seed capital for privatized social security accounts.
But here is my turnabout for advocates of the banking bailouts:
Have you also noticed that this hasn't turned out to be much of a great recession? Though unemployment is sharply up, consumption and output have changed little, and we may have already reached the trough. One interpretation of this is that the package of stimulus and bailouts worked. But given what we know about how these were implemented, isn't at least as likely that the panic wasn't as bad as it was sold to us?
I know that the insiders were telling us how calamitous it was. However, given the stigma of messing up when supposedly in charge of the economy and the human love for power, they have the right incentives to exaggerate the problem.
Posted by OneEyedMan at 7:03 AM | Comments (0)
August 24, 2009
Sometimes the right people already own it
To Some Chesapeake Crabbers, a $50 Document Is Priceless
It seems that forecasting the appropriate quota for crab fishing is made problematic by minor crabbers that use their permits irregularly. So they asked them to sell out and got huge bids, suggesting that they weren't interested. The state isn't taking no for an answer and is threating to take them away anyway at high but not as high as the fishermen wanted them prices.
I see a couple of interesting things here. One, if the fishermen really value their permits so highly, maybe the optimal policy is to leave them with their permits. If these guys value them at $5000 or more, then perhaps the right people own them already. If that interferes with other parts of the state's agenda, maybe they should rethink that agenda.
If they are frustrated by the role of the minor catchers on the aggregate haul, why don't they just act conservatively in setting the quotas. That would be likely to have a positive environmental effect and really only hurt the commercial crabbing industry.
But if the commercial crabbers want to haul more crabs, why not let them bid for them? I bet if you dig into this story you'll find professionals that find $5000 a permit uneconomical and they want to pay less. But if the crabbers value the permits at higher than the stream of income the permits provide, then so what. That's their business. If they want to reduce the crab catch as cheaply as possible, they should see how much the commercial crabbers want. That could well be the cheapest way to reduce the catch.
One simple solution is to ask the minor crabbers to pay a deposit if they want to crab that year, refundable if they actually do crab. Failure to pay wouldn't forfeit the permit, just deactivate it for a year.
Hat Tip:
Market Design's What if they ran an auction and nobody came?
Posted by OneEyedMan at 4:56 PM | Comments (0)
Would it work?
He gave me a quizzical look. We tried to imagine the scenario. A cardiologist tells an elderly woman that she needs bypass surgery and has Dr. Dyke see her. They discuss the blockages in her heart, the operation, the risks. And now they’re supposed to haggle over the price as if he were selling a rug in a souk? “I’ll do three vessels for thirty thousand, but if you take four I’ll throw in an extra night in the I.C.U.”—that sort of thing? Dyke shook his head. “Who comes up with this stuff?” he asked. “Any plan that relies on the sheep to negotiate with the wolves is doomed to failure.”The Cost Conundrum
This article suggests that fixing how doctors are paid is more important that figuring out how we pay for the medical care we get. That could well be true, but the quotation above merely suggests a failure of imagination.
I may not understand how to get optimal care for either my teeth or car, but I know that I can get a written description of the problem and proposed solution and get competing estimates and second opinions. That gives me significant power to get the experts to give good advice and compete on price. I don't have to understand my problems like a professional to get competition going.
Posted by OneEyedMan at 9:25 AM | Comments (0)
Highly unlikely to ever make economic sense
A Farm on Every Floor is an Op_Ed by Dickson D. Despommier, a Professor of Public Health at Columbia.
He advocates protecting the environment in a variety of ways by replacing or supplementing farm land by building farms as buildings. He says that this would improve urban air quality, reduce runoff, lower transportation costs, be beautiful, reducing water use, all while massively increasing yields.
One of the last lines in the piece is "When people ask me why the world still does not have a single vertical farm, I just raise my eyebrows and shrug my shoulders.". I'll tell him why, the economics stink.
He says a prototype "taking up one-eighth of a square city block, would cost $20 million to $30 million." For reference, a city block is 6.4 acres, so he'd going to try to make an economical farm for $20 million or more on .8 acres. I am skeptical that there is a profitable farm anywhere on earth that pays $25 million an acre for land. If they do, the don't grow lettuce, they grow wine or some highly specialized cash crop. Even when you consider his 5 story proposal is 4 farm-able acres, and therefore he is paying $6.25 million or more for farm land, it is still an enormous and unprofitable sum for most farm land.
I wish he had explained how the vertical farms handle sun light. I could see how a vertical farm in an empty desert with tall ceilings could get enough sunlight for each floor of crop, but I don't see how this would be possible in a city filled with buildings.
If it it comes to pass as he says, we run low on arable land and we need widespread use of hydroponics, aeroponics, drip agriculture, and so one, I doubt that buildings will be the solution. The Israelis show a more likely path. Lots of technology devoted to making the deserts farm-able with drip agriculture and soil enrichment rather buildings to grow food. I could also imagine a massive increase in the use of greenhouses to further decrease water usage and extend growing seasons. I'm no expert, but the fact that these methods are already in wide usage suggests they are far cheaper to use and easier to experiment with.
Posted by OneEyedMan at 7:21 AM | Comments (0)
Want to read something interesting about health care?
Read this:
How American Health Care Killed My Father
This is the second most important thing I've read about American health care reform after the Mankiw's Op-Ed, Beyond Those Health Care Numbers.
It is a fascinating look at how and why health care is messed up in America, and why. It comes down to health care providers pleasing their real customers, who are insurers and the government, not you. The way David Goldhill sketches it out, government reform would fix some of these problems, but worsen many of them. This seems likely.
Posted by OneEyedMan at 7:10 AM | Comments (0)
August 22, 2009
A world of a million skilled professions
In 2004, Smith and his colleagues Joe Wolfe and Elodie Joliveau at the University of New South Wales published a study in the Journal of the Acoustical Society of America that revealed the physiological cause of the soprano problem for the first time. They sent an acoustic signal through the vocal tracts of nine sopranos and used a microphone to measure how the signal changed when the sopranos sang vowel sounds at various pitches. They found that when a soprano sings at high pitches, she adjusts her vocal tract to make her voice resonate. In effect, she “tunes” the resonance frequency of her vocal tract to match the frequency of the pitch at which she is singing. This vocal-tract tuning, which gives a soprano’s voice enough power to fill an opera house, is what makes certain words at high pitches difficult for the audience to understand. (It is joked by singers that Wagner’s character of Siegfried in Der Ring des Nibelungen ought to have been called Sahgfried, as his name is sometimes pronounced that way by sopranos looking to get the most volume out of their voices.) Jane Eaglen, a critically acclaimed soprano who has performed Wagner’s works in opera houses worldwide, explains that sopranos must try to find a balance between power and clarity. “It’s really about how you modify the vowels at the top of the voice so that the words are still understandable but so that you are also making the best sound that you can make,” she says.Physicists investigate the grand artistic vision of one of the most influential artists of the last two centuries.
Just another example of the immortal lesson of the essay I, Pencil By Leonard E. Read, that the world is filled with particular skills and no one man can master them all. We depend immeasurably on the division of labor and trade in order to enjoy the immense wealth we do today.
Posted by OneEyedMan at 8:06 AM | Comments (0)
August 21, 2009
What great moderation?
A 1999 study in The Journal of Economic Perspectives by Christina Romer (now head of the Council of Economic Advisers) found that "real macroeconomic indicators have not become dramatically more stable between the pre-World War I and post-World War II eras, and recessions have become only slightly less severe." Ms. Romer also noted that "recessions have not become noticeably shorter" in the era of Big Government. In fact, she found the average length of recessions from 1887 to 1929 was 10.3 months. If the current recession ended in August, then the average postwar recession lasted one month longer—11.3 months. The longest recession from 1887 to 1929 lasted 16 months. But there have been three recessions since 1973 that lasted at least that long.Big Government, Big Recession Recessions may be longer, but milder. Many people would take that deal if they could get it. Just like band aids, some people like it slow.
Some of the arguments made by the article seem flawed:
CNNMoney recently calculated that the stimulus plan has spent just $120 billion—less than 1% of GDP—mostly on temporary tax cuts ($53 billion) and additional Medicaid, food stamps and unemployment benefits. Less than $1 billion has been spent on highway and energy projects. Commitments for the future are much larger, but households and firms can't spend commitments.
Many Keynesian economists think that the stimuli work through the expectations mechanism. Knowing that demand will be higher in the future supports consumption and investment today. I am deeply skeptical of the explanatory power of this line of argument, but it is not giving them a fair shake to measure the stimulus by the amount yet spent. Expectations surely matter, but do they matter enough to make a difference? In this case I don't think so, and I doubt Dr. Binder thinks so either. Words are limits are tight on Op-Ed pages (just 750!) but this misleads on the Keynesian explanation of stimuli.
Proponents of Big Government can't say we avoided the next Great Depression due to hypothetical stimulus money that is mostly unspent. So they argue it's more important that the federal government merely continued spending and didn't "slash" spending as in the early 1930s. But the federal government didn't slash spending in the early '30s. Federal spending rose by 6.2% in 1930, 7.7% in 1931 and 30.2% in 1932. Since prices were falling, real increases in federal spending were huge during the Hoover years.
Maybe so, but one can always argue that things would have been far worse without the federal stimulus and would have been better if it had been larger.
Posted by OneEyedMan at 7:12 AM | Comments (0)
August 20, 2009
Quote of the day
Let me be a free man, free to travel, free to stop, free to work, free to trade where I choose, free to choose my own teachers, free to follow the religion of my fathers, free to talk, think and act for myself -- and I will obey every law or submit to the penaltyChief Joseph On a visit to Washington, D.C., 1879
Posted by OneEyedMan at 9:23 AM | Comments (0)
What's the longest a human can live with special technology?
Your body wasn’t built to last: a lesson from human mortality rates is the best description of the distributions of life expectancy I've seen. He says that baring future technology, it is virtually certain that no human will live longer than 130 years.
Posted by OneEyedMan at 9:17 AM | Comments (0)
GDP versus wealth
Johnny Abacus leaves an interesting comment in response to when I said:
"Said another way, one million cataract operations is GDP, while a forty five million dollar painting is wealth."in my post Question of the day
He said:
This looks like a false comparison. Aren't the surgeries just a reallocation of who has the skilled time and who has the umpteen millions?
Both surgeries and paintings are wealth.The waste is not in the buying of the painting, but in the act of painting it (if it really is waste at all) - this artist (and others) would have invested in a medical degree and spent his time doing surgeries under different market conditions.
In my training, GDP (which is annual domestic production) is a flow (real $/year) while wealth (total value of results of all past production) is a stock (real $). Changing the ownership of the painting just moves around the quality of the stock of wealth, it doesn't change it. The decision to employ surgeons to do cataract surgeries in Africa instead taking extra vacations to play golf is one that changes the stock of output in the year. It is true that this also increases the stock of wealth because those surgeries have durable effects, but the marginal production decision first has the impact on output and then through output on the stock of wealth. The painting example just moves around wealth, the surgeries create wealth and also move it around. Even simpler, if the surgeons did it for free (and there were no other costs) then no wealth would be transferred, output would increase (and leisure decrease), and yet total wealth increased.
Posted by OneEyedMan at 8:33 AM | Comments (0)
A guide to making serious cocktails and why you should
Posted by OneEyedMan at 7:26 AM | Comments (0)
August 19, 2009
Something you probably shouldn't read
I finished Gridlinked in the airport last night. I give it an A for interesting technology, B for dialog, C for the plausibility of the politics, D for story and F for writing. There was a great deal of telling what was happening rather than showing which I didn't care for. The exposition on motivations for various people's actions was heavy and left little to the reader to do on his own. As is common among mediocre adventure stories, the hero is of near super-human abilities, not just in his martial powers, but also in his planning, foresight, and execution. Several villains also seem to predict the actions of others with impossible acumen. Eventually, when the various climaxes arise, you see the writer boxed in when unstoppable forces meet with immovable objects but the hero is victorious in predicable fashion, with little expended on finesse .
If you chew through science fiction like the daily newspaper then this is the first book in a half decent series to feed your brain. If you judiciously selection what you read because of time pressures, skip it. Instead, read The Player of Games, a much better written story about another secret agent in the far future where AIs run the government.
Posted by OneEyedMan at 5:01 PM | Comments (0)
August 17, 2009
I hope this means the culture is changing
It's Time to Legalize Drugs by two retired cops!
The article also notes the over $70 billion improvement in government financing from the move. If drugs are ever legalized, the financial rewards of doing so will play a big part.
Posted by OneEyedMan at 5:36 PM | Comments (0)
August 15, 2009
It is good that humanity is diverse
“If we continue to operate non-sustainably, then in 50 or 60 years, the US and Japan and Europe will be in bad shape. But my friends in the highlands of New Guinea will be fine. Some of my friends made stone tools when they were children and they could just go back to what their ancestors were doing for 46,000 years. New Guinea highlanders are not doomed,” he says, draining his pomegranate juice. “The first world lifestyle will be doomed if we don’t learn to operate sustainably.”Lunch with the FT: Jared Diamond If we only had one form of economy and one form of social organization we could be in serious trouble when it stopped working. It is nice to know that there are still lots of different strategies and systems being employed, even if I have no interest in being living under them. It is like a safety net for humanity, and yet I don't have to pay for it.
Posted by OneEyedMan at 9:07 PM | Comments (0)
August 14, 2009
Using licensing to restrict freedom at a freedom festival
I recently learned (EFF criticizes Burning Man for limiting attendees' fair use rights) that the burning man organizers have put enormous restrictions on what you can do with video and photographic material taken at burning man. Given the festival is in part a celebration of freedom, I found this a surprise. I can appreciate that some rules exist to give us all the room to express our freedoms. But if this is really about keeping naked pictures of people on the Playa off the internet, maybe loosing that aspect of being carefree would be worth the greater freedom of participants to make their art and document their experiences. That's not an obvious choice, and there are plenty of places where you can take pictures. Nevertheless, it is interesting that people would be uncomfortable having photographs on the internet of them doing things that they allow thousands of strangers to view as well.
Posted by OneEyedMan at 9:20 AM | Comments (1)
August 13, 2009
When to pay a compliment
Cowen recently said this about compliments,
There is strategy involved in giving and interpreting compliments. Let’s say you hear someone play a difficult –but not too difficult– piece on the piano, and she plays it well. Is it a compliment if you tell her she played it beautifully?That depends. You would not be impressed by the not-so-difficult piece if you knew that she was an outstanding pianist. So if you tell her you are impressed, then you are telling her that you don’t think she is an outstanding pianist. And if she is, or aspires to be, an outstanding pianist, then your attempted compliment is in fact an insult.
This means that, in most cases, the best way to compliment the highly accomplished is not to offer any compliment at all. This conveys that all of her fine accomplishments are exactly what you expected of her. But, do wait for when she really outdoes herself and then tell her so. You don’t want her to think that you are someone who just never gives compliments. Once that is taken care of, she will know how to properly interpret your usual silence.
I couldn't help recalling this exchange from Atlas Shrugged.
“If you tell a beautiful woman that she is beautiful, what have you given her? It’s no more than a fact and it has cost you nothing.But if you tell an ugly woman that she is beautiful, you offer her the great homage of corrupting the concept of beauty. To love a woman for her virtues is meaningless. She’s earned it, it’s a payment, not a gift. But to love her for her vices is a real gift, unearned and undeserved. To love her for her vices is to defile all virtue for her sake — and that is a real tribute of love, because you sacrifice your conscience, your reason, your integrity and your invaluable self-esteem.”
—Lilian Rearden in Ayn Rand’s Atlas Shrugged p.305 of soft cover.
It was pretty hard to find this quote because I couldn't recall exactly how it went. I had to exclude a lot of complement searches to find just the compliment ones. That the Dr. BlueEyedGirl knows this difference is one of the many things I love about her.
Posted by OneEyedMan at 8:49 AM | Comments (0)
August 11, 2009
Lessons of good design have yet to spread as far as we'd like
In the piece, The Information Architecture of Social Experience Design: Five Principles, Five Anti-Patterns and 96 Patterns (in Three Buckets) is a great summary of lessons of good design that website community designers would benefit from internalizing.
Posted by OneEyedMan at 9:57 AM | Comments (0)
August 10, 2009
Fact of the day
As of 2003, diet soda was 23% of the soda market by dollars of sales (Diet Soda Gains On Sugary Siblings). However, since diet soda seems to be purchased by people living in more expensive areas, it probably reflects a lot less than 27% of soda volume.
Posted by OneEyedMan at 1:52 PM | Comments (0)
The paradox that is America
More than most Westerners, Americans believe — deeply, madly, truly — in the sanctity of marriage. But we also have some of the most liberal divorce laws in the developed world, and one of the highest divorce rates. We sentimentalize the family, but boast one of the highest rates of unwed births. We’re more pro-life than Europeans, but we tolerate a much more permissive abortion regime than countries like Germany or France. We wring our hands over stem cell research, but our fertility clinics are among the least regulated in the world.The Unfunny Truth
Americans do love choice, even when it means that many will make bad ones.
Posted by OneEyedMan at 5:43 AM | Comments (0)
August 7, 2009
How unusual is this statistic?
The worldwide rate of twins is one in every 80 births. In India, the normal rate is lower, only one 250 births. But in the village of Kodinhi, in the Indian state of Kerala, there are at least 250 sets of twins in a population of 2,000 families. And the rate of twin births has been increasing over the past decades. Dr Krishnan Sribiju has been studying the phenomenon.Village of Twins“Without access to detailed biochemical analysis equipment I cannot say for certain what the reason for the twinning is, but I feel that it is something to do with what the villagers eat and drink.
We know that the number of children a mammal has is largely genetically determined. Given all the villages of the world, surely one would have an unusual allocation of genes in its residents such that they would have a large number of genes. In a world of growing plenty where more people can afford to raise two babies at a time and better medicine reducing the deaths of smaller babies, those carrying the higher likelihood for bearing twins could gradually outbreed those lacking those genes. There need be no exotic explanation.
Posted by OneEyedMan at 5:49 AM | Comments (0)
August 4, 2009
Sleeping versus thinking
There is no time of day that more Americans are thinking than sleeping.
Posted by OneEyedMan at 1:13 PM | Comments (1)
August 3, 2009
Traveling and listening to lectures
Posting will be light.
Posted by OneEyedMan at 11:59 AM | Comments (0)
August 2, 2009
How many homosexual households were there in 1960?
Because I just learned that This week’s Newsweek reports more than 500,000 polyamorous households in the U.S., and it strikes me that we are pretty much at exactly the same point on polygamy today as homosexuality was 50 or so years ago. There probably is massive untapped demand for polygamy among high status men and low status women. In a world without traditional gender or sexual norms, they are likely to get their way.
Though many advocates of gay marriage may not like the analogy to polygamy, I imagine that there are very few that wouldn't happily legally protect polygamous relationships as a cost of getting legal protection for homosexual relationships.
Posted by OneEyedMan at 9:55 PM | Comments (0)
A strong claims on strong drinks for a Sunday morning
The names of many cocktails survive, but what they are sits in a realm of hazy inexactitude. The highly reputable drinks writer of the Wall Street Journal not long ago implied that "fresh orange slices" were essential to an Old-Fashioned, which may have been true during Prohibition with the rotten liquor, but wasn't when the drink was born and isn't today. What makes the confusion in this case almost amusing is that the Old-Fashioned originated in purists' rejection of the fancy concoctions of the 1870s--when the modern cocktail was truly born--by ordering an "old-fashioned whiskey cocktail," that is, one without all the syrups, fruit juices, and wines. But, one of the things that makes this true beauty is that you can vary it in endless ways, not with extra ingredients but with different types of alcohol and different bitters. Old-Fashioneds are splendid with the more aromatic gins and aged rums. I make them with Armagnac and with Calvados, or with Laird's worth-any-search bottled-in-bond Straight Apple Brandy. The basic recipe is just that. And there's the rub. There are only a tiny number of foundational cocktail recipes: the Martini, the Manhattan, the Old-Fashioned, and the Daiquiri. Making these well is just something to master: like the sound of Bessie Smith's voice, how to carve a turkey, and the order of the Triple Crown races.The Cocktail Renaissance Cheers!
This article inspired me to try a proper old fashioned sometime soon. One claim I've heard about the new preference for simpler (less sweet) martinis and straight up drinks is that today's booze is much smoother than yesterday's and so requires less adulteration. That doesn't explain that super sweet concoctions that dominate the Friday's section of the drink market, but may explain what has happened to some of the more serious cocktails. One point the article almost makes several times is that if you water down your drinks, you can have more of them. That is something worth considering, especially when thirsty. I've head beer lovers complain about how strong many of the premium beers have become and how that gets in the way of a casual afternoon of drinking beer. Maybe someday soon I'll hear a bourbon or rye lover remark how watering down a stiff drink makes it into a much more casual affair.
Posted by OneEyedMan at 6:45 AM | Comments (0)
August 1, 2009
Rebuttal to the omnivore's dilemma
The only one I've seen yet, but quite good:
The Omnivore’s Delusion: Against the Agri-intellectuals
I hadn't realized how much industrial farms made use of techniques of traditional agriculture.
Posted by OneEyedMan at 5:10 PM | Comments (0)
Question of the day
The Princeton philosopher Peter Singer exemplifies the attitude against arts funding in his new book, The Life You Can Save: “Philanthropy for the arts or for cultural activities is, in a world like this one, morally dubious.” Singer points to the $45 million that the Metropolitan Museum spent on a Duccio painting in 2004 as an amount that would pay for cataract operations for nearly 1 million blind people in the developing world. “If the museum were on fire, would anyone think it right to save the Duccio from the flames, rather than a child?” Singer asks.The Culture Crash
This is a bit of a false comparison in two ways. First, many people would allow a child to go blind rather than allow the Duccio to perish in flame. Second, the forty five million dollars spent on a painting is just a reallocation of who has the painting and who has the umpteen millions. The seller of the painting could still turn around and use the funds to buy the cataract operations. Said another way, one million cataract operations is GDP, while a forty five million dollar painting is wealth.
Posted by OneEyedMan at 11:32 AM | Comments (1)