Tuesday, September 30, 2008

Emptying the Bottle: September '08 Links List

1) Should the Chinese complain about jobs being shipped to Spartanburg, SC?

2) What prominent economists think about each candidates on the issues.

3) "How's my driving" isn't just for truckers anymore. It's also for teenagers.

4) Google avoids pirates by shipping out to sea.

5) My favorite newscaster gets punched for exposing the cover up.

6) My hometown Greenville goes even greener.

7) Historians rank Bush as the worst president ever.

8) This guy linked to my blog, but I have no idea how he is. Has this ever happened to anyone else?

9) My favorite sketch group, Derrick Comedy, just released the trailer to their full-length movie, "Mystery Gang."

10) A LOST theory on time travel to hold you over until February.

*As always, you can see what I find interesting on a daily basis*

Monday, September 29, 2008

V-O-T-E Go Democracy!

Voting is light cheering at a football game, you don't do it to effect the outcome. Alone, your loudest scream will never encourage your team or disrupt the other. Instead you cheer so everyone near you knows who you support.

Thursday, September 25, 2008

Bailouts, Let's Trust the Experts

The regular response I've heard on the $700 billion bailout is that the issue is too complicated and that that we have to trust our politicians to get informed and make the right decision. Instead, I suggest we turn our trust over to the experts of the economy, not the experts of reelection.

Quoted by Greg Mankiw:
"The decisions that will be made this weekend matter not just to the prospects of the U.S. economy in the year to come; they will shape the type of capitalism we will live in for the next fifty years. Do we want to live in a system where profits are private, but losses are socialized?"

Said by Arnold Kling:
"Today, it is clear that the U.S. financial sector needs to shrink. As another one of your [he is talking to Ben Bernanke] former classmates, Ken Rogoff, has pointed out, the financial sector has accounted for an unusually large share of corporate profits in recent years. It is time for this country to shift talent and capital elsewhere. In order for that to happen, some firms in the industry need to tighten their belts, some weaker firms need to merge with stronger firms, and the weakest firms need to fail. As tempting as it is to intervene in this process to try to make it more orderly, dislocation is inevitable, and intervention may only make it worse. We have excesses. Too many housing units. Too many "homeowners" who don't have equity in their homes and never did. Too many banks and financial institutions. The excesses need to be worked out by the markets."

Posted by Naked Capitalism:
"First, let's focus on the aspect that should get the proposal dinged (or renegotiated) regardless of any possible merit, namely, that it gives the Treasury imperial power with respect to a simply huge amount of funds. $700 billion is comparable to the hard cost of the Iraq war, bigger than the annual Pentagon budget. And mind you, $700 billion is not the maximum that the Treasury may spend, it's the ceiling on the outstandings at any one time. It's a balance sheet number, not an expenditure limit."

Said by Arnold Kling:
"1) Today's economy differs from that of the 1930's. Then, it may be that the financial sector may have contributed to the downturn elsewhere. Today, the financial sector is the downturn. 2) The bailout blends finance with government. It is the Fannie Mae and Freddie Mac model, writ large. As we saw with Freddie and Fannie, when you blend finance with government, the firms have an incentive to manipulate the government and government has an incentive to meddle with the firm. 3) Trying to tweak the bailout to try to redistribute the pains and gains so that taxpayers come out better and shareholders/executives come out worse is beside the point. If you put lipstick on a pig, it's still a pig. 4) The housing market is out of balance, in part due to excess home borrowing. Until it is in balance, no one will know what mortgage securities are worth. Attempts to prop up home borrowing, by freezing foreclosures for example, are counterproductive."

Said by Bryan Caplan:
"My conjecture: If Paulson's bail-out were funded by a permanent tax increase sufficient to raise $700B in present value terms, it wouldn't stand a chance. The minimal public outcry, therefore, hinges on "debt illusion" - the mistaken view that debts, unlike taxes, never really have to be paid."

A petition signed by over 100 economists:
"As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise. 2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards. 3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come."

Also, here a long series of economists asked the same three questions:
1. How bad is the current market situation?
2. How bad are the current proposed bailout plans?
3. What's the one thing we should be doing that we're not?

If you're not skeptical yet, here is a quote from the actual proposal: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

Wednesday, September 24, 2008

More Places to Watch Videos Online

Here is a list of some sites that contain some excellent videos.
1) Reason.tv: A series of video documentaries and interviews that take a hard look at the variety of threats to our liberties -- and celebrate what it really means to be free.
  • Immigration: Let them in already! 
  • Here is a less academic but still interesting explanation of how Mexicans are a lot like machines.
2) TED stands for Technology, Entertainment, Design. This annual conference brings together the world's most fascinating thinkers and doers, who are challenged to give the talk of their lives in 18 minutes.
  • Debunking third-world myths with the best stats you've ever seen (watch the first 5 minutes) 
  • Here are some underwater astonishments, watch until the end.
3) John Stossel regularly does what most newscasters should be doing, saying "Give Me a Break!" to shortsighted thinking.
  • Oil Prices and Price Gouging 
  • Here Stossel answers the question: Aren't Sweatshops Exploitive?

Monday, September 22, 2008

Ron Paul Explains the Housing Crisis, 5 Years Ago

If you haven't seen this election as an attack on reason you're not listening. Is it any surprise that our most honest politicians are our least popular? Read the whole 2003 speech to the committee here. Hat tip to Justin for hat tipping to Michael.
The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.

Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.

Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.

Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.

No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.

Saturday, September 20, 2008

Business and Bailouts

In my last post, a statement was made that I feel is too important to leave in the comments:
I've heard these arguments [that price gouging for gasoline is actually good] so many times, and I'm always struck by the idea that if they're all true, then there is actually no such thing as corporate greed. Which keeps me skeptical.

Another thing that keeps me skeptical is the incredibly large amount of smart people who are blaming deregulation for our current financial crisis (http://tinyurl.com/4dafng). It seems very likely that not all regulation is bad.
To my understanding, these statements are half truths. AIG failed because they jumped into a new and very profitable insurance market that they did not fully understand. This could be for one or of two reasons: 1) they mistakenly took a risk and lost, which is the nature and success of capitalism or 2) they knew the government thought they were "too big to fail" so they correctly took the risk knowing the taxpayers would pay for the loss. The second is an instance where I believe corporate greed is not only existent but harmful. But don't misunderstand what I'm saying. If the second is reality, it is not AIG I blame. It is the government financiers who allowed them into the public purse.

The second statement is equally half true. Yes, I believe deregulation is at least partially to blame for Freddie and Fannie's failures, but again the blame falls on government not business. I blame the public officials of the 1970's and since who felt it was their duty to "work with mortgage lenders to help people get lower housing costs and better access to home financing." Freddie and Fannie are GSE's, Government Sponsored Entities. You cannot be perceived to be backed by the federal government and not be regulated. The profits went to the firm, but when the risks were bore by the taxpayers. The problem is not with greedy Fannie and Freddie, but instead with the government putting its gun where it doesn't belong in order to gain political support.

The importance of this bailout is not so much a worry in the short run. The problem is instead one of moral hazard. When you insulate people from risk they act more risky. When you force people to wear seat belts, they drive more dangerously. When you bail out lenders and borrowers for bad loans, you only increase the likelihood of loans like that being made in the future.

I don't see businesses as greedy or moral. I see them as organizations that seek to allocate resources to their highest valued use. Instead of conniving snakes, they are instead much more robotic. Simply responding to increases and decreases in prices. Price goes up, there is more money to be made, so they produce more, which pushes prices back down to marginal cost. Prices go down, there is less money to be made, businesses leave the market or produce less, and the price moves back up to marginal cost. This is not only a theoretical model, but is how markets look.

However (and this is a big however), the government regularly steps in to "protect" the people through regulation. People shouldn't spend $5 a gallon for gas, so let's punish businesses for increasing prices when supply is limited. People shouldn't pay $1000 a month for rent in NYC. So let's cap the price and let prejudice landlords divvy up apartments based on their own preferences. People should all have the oppurtunity to own their own homes. So let's help these sub prime borrowers get some debt they probably can't pay off. And here's the best part. Let's convince the American people it's good for them too.

Friday, September 19, 2008

Mock Turtle... Soup!

Here are some recently added You Tube videos from Fall 2008 of my old college improv group, Mock Turtle Soup:

Introduction game of Who Are You?:

Short Forms Games:
Everyday Olympics and Pop Up Book
Tag Team Monologue and Three Rooms

Long Form Set:
The Living Room
The Living Room Part II
The Living Room Part III

Wednesday, September 17, 2008

Stop Supply Gouging Me

Or maybe I should say: Please Price Gouge Me! Either way, I've been pretty frustrated with the recent accusations of criminal increases in gas prices. My new home state of North Carolina has recently implemented price gouging laws to "protect” consumers from predatory pricing. Here are my criticisms of their criticisms:

"The prices are ridiculous. No one can afford them. The lines are out in the street.”

No one can afford it yet there are lines out the door? Sounds to me like a sale not a rip off.

"That's not what they paid for it. It just seems to me they shouldn't raise the price until they have to pay for it"

So maybe you and the thousands of other people rushing out to top off their tanks shouldn’t react until then either.

"The BP ran out of gas late Friday afternoon, which helped quiet the frenzy – until a tanker arrived to replenish the pumps.”

This is the consequence of gas stations not raising their prices high enough and fast enough. Would you rather pay $5 for gas today or have no gas tomorrow?

"I encourage gas stations to avoid panic price increases and consumers to avoid panic fill-ups."

There is no reason to encourage anyone to do anything. Let the strain on supply be shown in high prices and let people decide for themselves.

But let’s suppose for a moment businesses really are taking advantage of misinformation and panic. Do we really want to live in a country where the government can tell business owners what prices they can charge? And especially in an industry as competitive as gas stations (can you think of any other product that shows its prices on hundred foot high signs?) Like most issues of the free market, this is not only an issue of resource allocation, but an issue of liberty. These businesses are financed, operated, and owned by private citizens. It is their prerogative to charge what they see fit.

Sadly this is not harmless political pandering. There have been seven subpoenas served in North Carolina to stations accused of overpricing. They could pay up to a $5,000 fine. The Governor Mike Easley has declared “we're going to be on top of this. We're not going to let price-gouging happen in North Carolina.” Sir, I would prefer you turn your attention to your own government, whose threats have deterred stations from raising prices, ensuring that I am supply gouged.

Update: Maybe there should be some laws against price gouging on cigars.

Saturday, September 13, 2008

Harrison's Favorite Things

If Oprah can do it, why can't I? So here are some products I've come across in the last couple of month that are worth checking out:

[TV] Lost: maybe the greatest television show of all time. If you're not watching it already, go to abc.com and catch yourself up before 2009.
[Blogs] Google Reader: If you read more than one blog, and you're not using this, you're working too hard.
[Food] Microwavable Vegetables: Birds Eye steams in 3 minutes and tastes just like you did it yourself.
[Food 2] English Muffins: For breakfast (with some butter or jam) or lunch (with ham and cheese) they are tasty and allow you to forgo the loaf of bread you'll never finish in time.
[DVD] Arrested Development: A show so funny you won't understand why it got canceled.
[Snacks] Stride Gum: The commercials don't lie. It really does last longer than you care to chew it.
[Games] Settlers of Catan: Monopoly + Risk and makes for the greatest board game I've ever played.
[Music] Songza.com: You can search, and usually find, pretty much any song you're looking for. Then take the ones you like and make a play list.
[CD] Paige Aufhammer: Recommended by a family member and then we noticed that Traci lived with her at a camp one summer. Her debut album is wonderful.
[GPS] Garmin nuvi 200: For $160 I never get lost with it (I always get lost without it).
[Radio] National Public Radio: I've had moral qualms with the public nature of the station, but you can't beat the talks. I really like The Story.

*Unlike Oprah, I can't send anyone home with any gifts.

Thursday, September 11, 2008

Political Exit Strategy

Alex Tabarrok over at Marginal Revolution has a great post on Why Libertarians Should Vote for Obama. Here are some goodies:

First, war. War is the antithesis of the libertarian philosophy of consent, voluntarism and trade."

"With war has come FEAR, magnified many times over by the governing party. Fear is pulling Americans into the arms of the state. If only we were better at resisting. Alas, we Americans say that we love liberty but we are fair-weather lovers."

"Tax cuts, the summum bonum of Republican economic policy, are a sham. The only way to cut taxes is to cut spending and that has not happened."

"Exit is the right strategy because if there is any hope for reform it is by casting the Republicans out of power and into the wilderness where they may relearn virtue."

"Remember that if a political party can count on you then you cannot count on it."

"When in the wilderness, Republicans turn naturally to a critique of power and they ratchet up libertarian rhetoric about free trade, free enterprise, abuse of government power and even the defense of civil liberties."

Here are some of the main ways the current Republican Party has enlarged the federal government to the detriment of the American people:

- No Child Left Behind: Well funded or not, it's taking a Constitutionally state issue and complicated it with federal requirements.
- The Patriot Act: Taking away much needed judicial oversight of the executive branch, just to name one problem.
- Invasion of Iraq: Setting a standard of preemptive strike against other nations.
- Treatment of Prisoners: Ignoring the intentions of previous agreements and holding prisoners indefinitely without charges.
- Torture: Liberalizing the definition into meaninglessness.
- Deficit Spending: Decreasing taxation without a deliberate decrease in spending. Increasing the tax burden on future taxpayers.
- Housing Aid: The government has now declared itself the lender of last resort for some unwise homeowners and lenders.
- Fannie and Freddie: Bailing out private investors at the expensive of taxpayers. The problem should have been dealt with before government buyout was required.
- Flight Regulations: Flying in America has become restless, timeless and shoeless.
- Farm Subsidies: Not only keeping, but enlarging the outrageous farm subsidies.
- Campaign Finance Reform: Attempting to limit political speech, unsuccessfully.
- Energy Independence: Too frustrating to sum up in one sentence. Expect a future post.
- Etc: Keeping unconstitutional national bans on assisted suicide, gay marriage, online gambling, marijuana and stem cell research just to name a few.
- Finally: Forgetting the Tenth Amendment, which reserves to the states any powers not specifically delegated to the federal government.

That list was therapeutic.

Tuesday, September 09, 2008

Raise the Price of Political Talk

Whether it's promises of leaving no child behind, energy independence or predictions of Hilary and Giuliani's impending victory, it seems most political claims are erroneous. In fact, not only are campaign promises and predictions rarely true, but there seems to be little consequences to saying them. For this reason, I have decided to ask others to back up what they say with their money. This experiment begins with a confident prediction from my father about McCain's inevitable victory. I asked him to back up his his claim with a $20 bet. Political preferences aside, I see the cards in favor of Obama (even counting the recent Palin bump). My hope is that you, my readers, will challenge my statements with this same fervor. If you feel like I have made a statement or a prediction that data or the future will not support, ask me to put my money where my mouth is. Also, by making the bets public on this blog, it will hopefully result in less erroneous talk and more real discussion.

Thursday, September 04, 2008

We Need More Political Apathy

During this election cycle, but certainly not limited to it, I have noticed that people's political passion is not necessarily correlated to their political knowledge. This results in public support for damaging policies. It also skews the discussion away from candidates' stances on issues and into simpler topics (flag pins, home ownership or pregnancy). We don't see this problem in other areas of expertise. No one is passionate about changes in the medical field unless they are experts. No one condemns drivers for not being more active in their car repair. Instead they leave it to the experts. So why is the political world so different? Peer pressure.

We may be out of high school, but we still haven't escaped it. We regularly hear how it is our responsibility as a citizen to vote. Some even suggest it is our legal obligation. It seems that many organizations try to "get out the vote", "rock the vote", or threaten "vote or die." I'm not saying that the average person shouldn't care about politics. Instead, I am insisting that we not ostracize people who have little opinion. Many times their menial political opinion matches their poor political knowledge.

Finally, I don't think this issue is as controversial as it sounds. The electoral college, indirect election of Senators, and the ratification of the Constitution itself are all example of the Founding Fathers attempts set up structural boundaries to limit the influence of everyday citizens. The good news is that increases in technology has allowed information to flow more freely. That and the increase in education permits the changes in those laws. Let me restate, I do not condemn people for being politically active. But I do require the same of them that I do my doctor and mechanic. That they become knowledgeable on the subject and hopefully that will result in better political outcomes.

Tuesday, September 02, 2008

Economics of Gainful Unemployment

Or, what I've learned after being unemployed for a month:

1) The likelihood of getting something done in the afternoon is directly proportional to how much I got done in the morning. Sleeping in sets the tone for my entire day.

2) I have the comparative advantage of producing sleep. Now if I could just find a way to trade that.

3) When unemployed the diminishing utility of leisure is high. The joy of relaxing quickly loses its enjoyment.

4) When your opportunity cost of time much like it was when you were a kid, you begin to spend you time accordingly. My reading list this month has consisted of comic books and a fictional biography of a zombie invasion.

5) According to Traci, a positive externality of having an unemployed husband is that my supply of household chores has shifted to the right.

6) There may be some economies of scale in producing "judge shows":
Fox: 11:00 Judge Maria Lopez, 11:30 Jury Duty, 2:00 Cristina's Court, 2:30 Judge Judy, 3:00 Divorce Court, 3:30 Judge Alex, 4:00 Judge Judy, 4:30 Judge Joe Brown
NBC: 2:00 one hour of People's Court, 3:00 one hour of People's Court, 4:00 one hour of Judge Mathis
MyRDC: 12:00 one hour of Judge David Young, 1:00 one hour of Cristina's Court, 2:00 Judge Alex, 2:30 Judge Alex (Sugar Mama Drama Week), 3:00 Divorce Court, 3:30 Divorce Court, 4:00 one hour of People's Court, 5:00 Judge Joe Brown, 5:30 Judge Joe Brown, 6:00 one hour of People's Court

I happily start substitute teaching this week.