Tuesday, January 31, 2006
Opening the Enron Trial: Never Mind The Quacking, There Is No Duck
Over at Conglomerate, where much Enron trial blogging is sure to be forthcoming, Christine Hurt suggested the following opening for the defense to try to define the terms of the trial:
"Ladies and Gentlemen, this is a story about numbers and a story about trust. My client, Ken Lay, has spent his life thinking about numbers. He believed in numbers. And he trusted the men that showed him the numbers."I couldn't help but note in the comments over there that such an approach might work better for a client who wasn't an economics PhD (and thus might be expected to do more than trust the numbers guys). Evidently, it was too defensive for the defense team, who reportedly took the classic "deny everything" approach instead (Real media video at the 2nd link). Kenny Boy's lawyer called the company "one of the finest free-market institutions the world has ever seen." Evidently, they've taken the same temperature of Houston as Prof. Hurt, though a possible implication is that the defense hopes Houstonians will let themselves be swindled by The Man #1 to stick it to The Man #2.
The catch with that approach is that it's not hard to disprove the claim that Enron was a New Economy miracle laid low by bad publicity and overzealous prosecutors. Indeed, in the space of a long paragraph one of "Oscar Madison"'s commenters clearly explains how the deals padded Enron's current profits and/or pumped debt off its balance sheet without materially reducing Enron's responsibility for the debt. Needless to say, that's led Lay and Skilling to pin the entirety of the purportedly nonexistent blame Andrew Fastow early, too, which is tantamount to playing the "how could you expect us to be worth the hundreds of millions of dollars we were paid" defense. Recall, that worked really well for L. Dennis Kozlowski.
Good luck to the Feds.
(Note: Edited a bit on 2/1/06. Another Enron-related post is here.)
A Note of Anti-Sentimentality
For an antidote to the previous post, what can beat unnameable monsters made out of LEGO (lots of pictures here)? And the TARDIS!
Our Monday Evening
Someone gave us a copy of Robert Munsch's Love You Forever at some point; I don't remember who it was. It's about the love between a mother and son from infancy through adulthood. Echoing the consensus of the playgroup, a reviewer from the Regina (SK) Public Library described it as "sentimentality at its worst" but noted its devastating effectiveness:
Munsch plays on the sentiments of his listeners to provoke a reaction that he will no doubt receive. A good supply of kleenex tissues will be needed.Indeed, I'd paged through it once a long time ago, and after finding a tissue, tucked it away where it was unlikely to be extracted by a casually browsing toddler. In some respects, it's better and in others, it's even worse than that. In an absurdist turn, it literally depicts something I actually hear from my own mother: No matter how grown up I get, I'm still her baby. That would be nicer were the humor not pretty well drowned in the sentimentality, though. The 'worse' part, in my view, is that Munsch relies on a crude stereotype of the boy as basically a terror between infancy and adulthood. Yet his mother loves him anyway! (*)
Unfortunately, John is now a much more curious little boy, has found LYF, and wanted it read to him shortly after my return home from work yesterday. He had skipped his nap. Julia, who is teething (molars) and suffering from the same cold as me, skipped both naps. I massively overcaffeinated myself before work and crashed around lunchtime. We were all frayed.
Suzanne took a shot at the book, and barely made it a page. I took over, and made it into the boy's early adulthood, but only by skipping the sentimental song that's repeated throughout the book. I eventually lost it, too, creating a very irate boy who demanded to have the rest read to him. (But I'm glad to see Brayden King write that similar things happen to other people. This makes me not feel so bad about getting misty when Luke and Leia are born in ROTS, which I view as a general parent reaction to new babies, which I found unmoving before having my own.) Then our aged laser printer refused to print out some TtFTE coloring pages in finite time. I don't remember what the calming influence was — dinner, maybe.
We did enjoy some mean reversion in the form of a relatively smooth bedtime experience. John even said "I love you, Daddy!" after thanking me for tucking him in. Sniff. Then Suzanne had the brilliant idea of making butter spritz cookies, and while our manual cookie press is a workout in itself (**), the evening was redeemed.
(*) Which is not to say that this can't be more-or-less literally true, as John or Julia can act their respective ages in the worst possible way, but then all is forgiven when they climb on my lap to read (e.g.) a TtFTE story or The Very Hungry Caterpillar.
(**) We had been given an electric press at one point, but I managed to burn out its wimpy motor with the Betty Crocker spritz recipe. I keep my eye out for a more robust unit a la my mother's Wear-Ever Super Shooter, which is a large fraction of my age and apparently still ticking, but none of the kitchen stores of the upper Midwest seem to have anything matching its description.
Monday, January 30, 2006
I was tagged by Corndog.
Remove the blog in the top spot from the following list and bump everyone up one place. Then add your blog to the bottom slot.
3) dr four eyes
5) Marginal Utility
or (Corndog was double-tagged)
1) zydeco fish
5) Marginal Utility
Next, select five people to tag
I've been declining to tag people for memes lately, but I hereby announce a change in policy and span the globe with:
1) Janelle Renée
5) Xtin (a new inbound link showing up in Technorati; hey there!)
What were you doing 10 years ago?
January 1996: Making arrangements to travel to Madison for the on-site interview for what would turn out to be my present job (*). Commuting from Wilmington, Delaware to College Park, Maryland to teach two classes at Maryland. The fraction of the commute I did by train allowed me to read Infinite Jest that semester. I finished my dissertation in 1998.
What were you doing 1 year ago?
January 2005: Enjoying life with Julia (and the rest of the family) as she was leaving the brand-new newborn stage. Maintaining a small outpost in the war on the Republican war on Social Security. Wondering where the G5 PowerBooks were. So much easier to remember with a blog archive to consult...
Five snacks you enjoy:
A. Butter spritz cookies.
B. Cheese and crackers. Can be fancy cheese and fancy crackers, or an everyday cheddar on a Ritz. I am less picky than you might think.
C. The spicy nuts-and-seeds mix that they put on the table at Frontera Grill. Better that Rick Bayless doesn't know my willingness-to-pay for that.
D. Chips and salsa/guacamole/hummus (not hummus at the same time as the former two, though).
E. Green olives marinated in gin and vermouth.
Five songs you know all the words to:
A. Robyn Hitchcock, "Uncorrected Personality Traits"
B. The Go-Go's, "Our Lips Are Sealed"
C. The Folksmen, "Old Joe's Place"
D. Cocteau Twins, "Aikea-Guinea" (kidding)
E. The Kingsmen, "Louie Louie" (ditto)
Five things you would do if you were a millionaire:
Um, I'll take the minimalist definition of "millionaire."
A. Say "adieu" to most present creditors. (A credit card is required for too much of modern life to flip them all off.)
B. Move up from having Quite an Awful Lot of LEGO pieces to having Tons, by the Fibblesnork LEGO Survey's classifications.
C. Build a garage and fix a few other shortcomings of our house, but otherwise pretty much stay where we are and with what we have.
D. Struggle with whether it would be remotely worth it to pay to have one or more of the kids sit in a 680-student class with N. Gregory Mankiw (six lectures a semester?!) as the tiny, fast-talking dot in the front of the lecture hall, vs. a small section with a non-famous professor at a less-fancy-pants university, rather than the how.
E. Do "L'Etoile Me."
Five bad habits:
A. Staying up way too late playing computer games, idly checking favorite blogs for improbable updates (a task recently automated), attending late movies, etc., as if I'm still 22 and can violate my sleep constraints with impunity.
B. Getting into standoffs with John of the "You must eat your peas!" "I don't want them!" variety.
C. Using the other electronic babysitter when I don't really want to help John with the TtFTE website.
D. Being cryptic when I know exactly what I want.
E. Being cranky when I know that I have far less to be cranky about than most people.
Five things you enjoy doing:
B. Building LEGO spaceships for John; Duplo animals for Julia (which she promptly destroys).
C. Gathering information.
D. Re-transmitting portions thereof.
E. None of your business (copied from Corndog's responses)
Five things you would never wear again:
A. Loafers without socks. Maybe my feet have become smellier with age, but probably not.
B. Any pair of pants I owned in grad school. In a few cases, this is only because 4-5 trips a week to the gym don't quite make up for the loss of walking all over campus and eating a near-zero-fat grad student's diet.
C. Velour. I'm all about very soft natural fabrics for sweaters these days.
D. Plaid shorts.
E. I am not totally opposed to designer logos, but I try to avoid being a walking advertisement where possible. I also have a T-shirt exemption for bands, charitable events, beloved software purveyors, and academic institutions with which I've been affiliated.
Five favorite toys:
B. Bricksmith, LDGLite, and Mac Brick CAD, the main LEGO CAD tools for my computing platform of choice
C. L3P and POV-Ray, for making nearly photorealistic renderings of creations from (B)
D. Fortran (almost, but not quite, kidding)
E. A sturdy sauté pan.
(*) Really, the predecessor of my present job, as much of my time now is spent directing other people who do stuff I used to do myself.
A Brief History of Freakonomics
I wish Steven Levitt well (though I wish he'd post the text of his working paper on child safety seats, subject of a controversial NYT column, which has been "coming soon" for several months; I suppose if I were so inclined, I could reach out and ask). I hope that the success of Freakonomics makes everyone want to pay economists lots of money and encourages enough smart students to enter the field that we can actually fill our vacant staff economist position. Still, this Louis Uchitelle lede irritated me in a way that perhaps Jeremy can describe in one of his short short stories:
Taking as a model the research techniques that Steven D. Levitt displays in his best-selling book, "Freakonomics," graduate students in economics are focusing on small insights about the economy rather than broad theories that explain how the overall system works.News flash! (Woof, ouch!) The fraction of graduate students who work on theories of econo-everything has always been vanishingly small. Still, I'd expect there's a Friedman or Samuelson aspirant or two out there in the assistant professor ranks, just like there are prominent public economists with wide-ranging professional contributions out there among the senior but not super-senior ranks. We just don't know who the future stars will be.
Meanwhile, the article does not want for tendentious sweeping generalizations. Levitt says, "We have lost our optimism that the tools of economics can be used to manage the economy," which might come as a surprise to everyone who might think that the Fed's macroeconomists are optimistic — maybe over-optimistic — about their ability to use the tools of economics to manage the economy.
To whatever extent grad students in the elite departments see themselves as brains-in-vats "explor[ing] the economy without becoming advocates for one solution or another," as Uchitelle puts it, it would be inappropriate to draw the conclusion that the amount of policy advocacy based upon invocations of economic theory is likely to decrease. I actually see it as a bit of a pathology that some academics don't seem to recognize implicit biases in analytical methods, which is if anything reinforced by a view that graduate training is purely in the application of value-free tools.
What Levitt has done, in effect, is to popularize what the vast majority of economists have been doing all along.
Levitt's colleague (and quasi-Nobel laureate) Gary Becker was doing what a sophisticated marketer might have called "freakonomics" when Levitt and I literally were in diapers, if not earlier, through his efforts to explain bits of what one might consider in the province of sociology using neoclassical microeconomics.
Ditto some major figures of the "new" economic history. Some classic works, e.g. Robert William Fogel on the railroads, applied insights from elementary economics (and not even all that well, really) to historical matters that may have been considered more-or-less settled by traditional descriptive — vs. counterfactual — techniques. Economic historians also take the cake, in my view, for devising novel uses of the often extremely limited data that exist. Some works of the new economic history are doubly freakonomic, just to pull one out of a hat, University of Delaware economic historian Farley Grubb's "The Market Evaluation of Criminality: Evidence from the Auction of British Convict Labor in America, 1767-1775," published in the American Economic Review just about five years ago. (*)
Last, if there is an increase in interest in smaller micro topics, there's a simple economic explanation that I'm surprised to see go unmentioned: There are a lot of jobs there, especially outside the academy. (And non-academic employment opportunities support the relatively rich pay for academic economists.) My perception is that corporate macro work has been consolidated in a handful of consultancies, so cut out central bank jobs and the opportunities are in finance (the big money), then various micro- and meso-disciplines, often under the guise of general quantitative economics.
(*) Farley was not randomly chosen, though the paper pretty much was. I knew him a little, back in my Maryland days, for one. For another, his applications of unconventional data sources have made him a relatively rare economist who gets to be embroiled in public debates over his work. I suppose it is not bad, in a way, to have someone care enough about what you're doing to pick a fight over it.
Sunday, January 29, 2006
Bugs Are Bugging Me
Those of you out there with the occasion to watch children's television lately will surely have noticed the "e|i" 'bug' in the corner of the screen during some of the favorite shows of your Adorable Offspring.
Let me offer this proposition: The "e|i" label is to the broadcaster's public interest obligations what shrink wrap licenses are to fair contracts. Not only is the "e|i" bug superimposed on educational programming stalwarts such as "Sesame Street" that clearly provide some instructional content, but also on the likes of "Blue's Clues" and "Dragon Tales" which are to instructional programming what batter-covered frozen freedom fries are to fresh vegetables.
Here's the "educational philosophy" of Dragon Tales:
And, I suppose, to teach kids that disabled dragons are just as good as the ordinary flying-and-fire-breathing kind.
- To encourage young children to pursue the challenging experiences that support their growth and development.
- To help young children recognize there are many ways to approach and learn from the challenging experiences in their lives.
- To help young children understand that to try and not succeed fully is a natural and valuable part of learning.
Likewise, from the back of a "Blue's Clues" DVD, describing the a 2004 episode:
"Love Day" Promotes:Let's get past the Simpsons reference in the "Love Day" title — the other Love Day is a holiday concocted by marketers to encourage consumerism in a dead spot on the calendar:
- Empathy and Emotion
- Story Comprehension & Recall
- Asking Questions
Manager: Okay, people. We need to cook up a new holiday for the summer....leading to a managerial edict to develop something like "Love Day" but not so lame; cut to the Simpsons surrounded with Love Day crap. (Yes, the mystery is to discover the identity of an anonymous sender of a "Love Day" card received by Joe). It comes across as a wink to certain parents, but what kind of wink? 'This is crap, and we all know it?'
Something with, eh, gifts, cards, assorted gougeables.
Woman: How about something religious? We had great penetration last
spring with "Christmas II"!
Man: Ooh, I know, Spendover, like Passover but less talk, more presents!
Meanwhile, the lessons promoted by "Love Day" are so generic that an episode of "Three's Company" could be construed as promoting them. Asking questions?!? "Why does Mr. Roper keep looking at Jack that way, Daddy?"
Saturday, January 28, 2006
Saturday Toddler Extra: All Toddling, All The Time
Julia is now walkling everywhere.
She also has some molars coming in, so you might imagine that sleep has been Problematic. You would be right.
Meanwhile, John was hard at work on alternative colorations of the TtFTE engines. Edward spent parts of the day blue, black (shown), tan, and red.
Errant SF Futurism and Our Dumb Computers: Notes Toward a Review of Accelerando
Near-future futurism is risky, in that some or most of the audience will eventually get to see what turned out, what was reasonable to expect but didn't turn out, what was (for one reason or another) totally full of crap, and what else was totally overlooked.
For example, pop in the DVD of Blade Runner (1982), famous for its visual design of Los Angeles in 2019 featuring flying police cars and a forest of futuristic skycrapers dominated by the enormous pyramidal headquarters of Tyrell Corporation. Even though it's a bit early to make the call, the distinctive visual elements can be classified as totally full of crap. What may seem to be bizarre feats of bio-engineering can't be ruled out, though it's doubtful they'll take the form of creating genetically-engineered people lacking the usual civil rights. Nuclear apocalypse? (*) We can keep our fingers crossed.
Almost totally overlooked was the Moore's Law implication that computer chips will sport billions of transistors (and soon) — our ubiquitous microelectronics, not to mention macroelectronics like giant flat-screen TVs, are conspicuously absent. The scene where Rick Deckard uses voice commands to navigate a 3-D snapshot on some sort of computing device is almost painful given knowledge of modern 3-D computer games.
Obviously, some artificial intelligence stories, notably 2001: A Space Odyssey, have suffered not just because we have had difficulty getting past the tin cans in low-Earth orbit stage of human space exploration (**), but because our now ridiculously powerful computers (by the standards of any time sufficiently far in the past, say 10 years or more) remain really stupid.
There are plenty of silly things that happen to be highly computation-intensive. For instance, I created this image in support of a possible dorktacular future post; it took 2 hours, 6 minutes, 55 seconds to render on my 2GHz iMac G5. The iMac has variable-speed cooling fans that provide some indication of how hard the computer is working at any given time — not very at all, in nearly every use to which it's put, but they were running at full tilt for those two hours. This places part of the blame on software designers, who could be said to have failed to come up with good uses for zillions of idle processor cycles here and on nearly every other desktop.
Which takes us to Charlie Stross's starting point in Accelerando, the inaugural Marginal Utility book club reading material. (***) It's a world of a few years hence that closely resembles our own, but with better computers and ubiquitous very high-speed wireless internet access. That, of course, is perfectly plausible. Indeed, our wireline telephony oppressors seem hell-bent on pushing us into that world.
From there, Stross takes the notion of 'accelerating returns' a la Kurzweil "seriously" — in the sense of creating a fictional world in which it should be taken seriously because it describes the actual pace of technological progress — and things get weird fast. Much of the weirdness stems from machines' ability to extend and even subsume human consciousness. (****) For that to happen, there needs to be an enormous qualitative leap in which the transistor population boom (and the corresponding computation boom) moves us past the ability to add lots of numbers very quickly and the relatively simple (if useful) 'bots the current computational technology allows.
Since the technological transition in Accelerando happens roughly 10-15 years from now, one question is, what will anyone make of the novel in 25 years? Will it be regarded as an advanced version of pre-rocketry accounts of trips to the moon?
(*) The Philip K. Dick source material, Do Androids Dream of Electric Sheep? (1968) made it clearer than the film that the setting is postapocalyptic.
(**) Not without good reason, as robots don't need to worry about being kept alive in environments that are extremely hostile to terrestrial life, and notwithstanding John Tierney's column in today's Times (shorter Tierney for non-Times Selecters: Real science is boring, so what we really need are a few rich people to ignore the lesson of Bill and Melinda Gates and waste enormous sums on a great big adventure).
(***) Pub Sociology's Brayden King joined in but reports not having completed the novel. Since Accelerando consists of four works previously published as novellas (or long short stories) plus some additional connective prose, portions can stand alone to a greater-than-usual extent.
(****) Stross, who maintains two blogs, posted a spoiler here.
Friday, January 27, 2006
Hallucinogens in the Water, II
Thomas Friedman's recent columns highlighting the problems stemming from American oil addiction have been less annoying than usual. But really, fellow Times Select users, will Friedman really be listening for Bush to propose a real energy independence moonshot (as opposed to the rational expectation: a few bromides and more of the same-old that's passed for Bush energy policy), stiff gas tax and everything, and then announce Cheney's resignation in favor of a greener CEO?!
I was looking for the "April fool's!"
While we're at it, one thing Friedman mentions that's less helpful, and has also afflicted the NYT's editorialists, is propagating the belief that flexible-fuel vehicles — meaning, specifically, cars and trucks that can run on gasoline or a blend of 85% ethanol and 15% gasoline (E85) — is a positive step in the near term.
More efficient processes for producing biofuels may eventually improve ethanol's energy balance problem, but until then, ethanol mainly substitutes an abundant but highly polluting fuel (coal) and another expensive fuel (natural gas) for a portion of the oil in a gallon of gasoline. The real problem arises if you try to pour E85 down the gullets of the U.S. vehicle fleet in anything like its present configuration: There's only so much land for growing the plants that will be distilled into the hooch. The presence at the Detroit auto show of such woefully misguided concepts as the Ford Super Chief pickup, a monster that's mostly for show but which sports a flex-fuel V-10 engine that may see the light of day in some form, demonstrates the cognitive dissonance. If we're to be "saved" by vehicles that are lucky to make it 10 miles on a gallon of ethanol, then we're doomed.
Hallucinogens in the Water
Today's advance GDP growth estimate for the fourth quarter of last years was terrible. Among other unpleasantries, the measured inflation indicators in the report were not as mild as one might have expected.
The stock markets, for now, seem to be saying 'party on!' (Of course, there are pitfalls to attributing short-term market movements to any news — in this case, the balance of the GDP data andcorporate earnings news from Microsoft and Procter & Gamble.)
We say, urk!!
Thursday, January 26, 2006
The Onion Is A Priceless National Treasure, IV
More Companies Phasing Out Retirement Option:
"Under the new approach, our employees gain the advantage of lifelong job security..."
...companies are phasing out the retirement option in favor of "indefinite employment" plans, under which thousands of qualified workers will continue to earn yearly stipends in exchange for work.
"To the list of outmoded and costly business practices such as health insurance, overtime pay, and lunch breaks, add age-based quitting..."
Legacies: Reaganism -> Bushism
Some fuss is being made about Bruce Bartlett's forthcoming Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. Bartlett is a supply-side economist, policy architect of the original Reagan tax cuts, and poster-child for the non-equivalence of think tank and tenured (or tenure-track) academic jobs for Horowitzian score-keepers of political biases in the academy (*). In James Wolcott's reading, the shrilly-titled book's thesis is:
...that Bush is much closer to Nixon than Reagan, and that conservatives have reason to rue that they ever mau-mau'd Clinton about Monica. An unharassed, unbesieged Clinton might have truly reformed Social Security in his second term, according to Bartlett. The Monica follies made that impossible. Yet history will record that in economic Clinton was the far more prudent, serious, and conscientious leader.This is, of course, because
Compared to Bush, [Clinton] looks like a competent, responsible, functioning adult.Failing to resist the snark opportunity, Brad DeLong mostly forgets the basis of comparison and takes the "yeah, but keep Clinton away from my daughter" route. Considering the stories about Bush's notably short fuse, his manias for secrecy and other trappings of official discipline, not to mention his suffering assault-by-pretzel, that Bush should be more welcome than Clinton near one's minor children assumes facts not in evidence.
The more substantive shortcoming of DeLong's and Wolcott's reactions to Bartlett (so far, anyway) is not calling bullshit on Bartlett's premise regarding George W. Bush and Reagan.
That is, the reality-based reaction should be, "What 'betrayal of Reagan's legacy?'" Is Bushonomics not in fact the apotheosis of Reaganomics — all the supply-side not-taxing and spending that's politically feasible, without grown-up worry-worts to whisper that borrowed money eventually must be paid back? (**) What exactly was Bush père punished for by Reagonomics' true believers, when he allowed reality to supersede lip-reading and set part of the stage for Clinton-era fiscal rectitude? Or, to the extent Reaganomics was occasionally moderated by some then-surviving grown-up Republicans, is there any reason at all to think that Reagan himself was one of the grown-ups?
Clearly, prominent conservatives willing to break orthodoxy and take on the Bush administration are rare, so perhaps there's an inclination not to take the opportunity to paddle the bottoms of defectors in the name of common cause. As a matter of political strategy, I strongly suspect such inclinations would be met with profane derision in Karl Rove's office.
(*) Bartlett, who holds an M.A. from economics powerhouse Georgetown, recently was fired for non-orthodoxy by the conservative National Center for Policy Analysis. See Wolcott for a link.
(**) It might be objected that the Medicare prescription drug benefit is not very Reaganish. However, faced with the contemporary Social Security crisis, Reagan signed onto a (payroll) tax increase to better fund future benefits, rather than privatization. Also, the correct counterfactual is whether Reagan, with political advisers selling the prescription drug benefit as a potentially popular means of outflanking the Democrats, would have drawn a line and either not promoted the legislation or vetoed it if it came to his desk anyway.
Wednesday, January 25, 2006
Call For Whines
A while back, I'd volunteered at Phantom Scribbler's place to host the second Whining Carnival, shooting for a release sometime this week. The actual schedule will depend on obtaining a critical mass of whines, and let's just say that I don't have it yet. Don't make me whine until you submit something.
Leave a comment here, tag your post with "whining" at del.icio.us or technorati, or e-mail me a link at atbozzo-at-gmail-dot-com (also not a bad idea if you take the tag route, since the "whining" tag appears to be in broader circulation than the Scribblersphere).
Through the magic of post time manipulation, I'm going to make this stick on top of the blog for a few days.
Know Yr. Blogger
As part of a new "meet the neighbors" feature, I answered some questions posed by Jesse Russell over at Dane101.com. In the event you're upset about not being mentioned, by name or otherwise, please write something about it and submit it for the Whining Carnival.
I thought it was cute that the profile includes my LEGO minifigure avatar, but if you think it's just weird, here's the real me, with the boy, waiting along State St. for the fire truck parade last fall.
On Big Costs of Executive Pay Disclosure
Conglomerate guest-blogger Michael Dorff notes that some seemingly regulation-averse corporate lawprofs contend that the SEC's proposed executive pay disclosure requirements will impose substantial (and, moreover, unjustified) costs on firms. For the most part, the claim defies my credulity, insofar as busienss reporters appear able to compile CEO pay statistics for large numbers of corporations on what I'd presume to be budgets that barely would buy lunch for an entourage of compensation consultants.
However, things are stranger if the Chicken Little lawprofs are right about disclosure costs. The existence of substantial executive pay disclosure costs would imply that corporations and their boards have at best vague ideas as to the amount of compensation being shoveled at the executive ranks, and that boards are broadly derelict in their duties to ensure that pay and performance are aligned (woof, ouch — I know). As the saying goes, you can't manage what you don't measure.
Wednesday Spaceship Blogging
The website for the New Horizons Pluto-Kuiper Belt mission has a getting underway note from the Principal Investigator that tickled my geek fancy. Check it out. Amusing trivia:
Because we have to slow down... by those 18 meters per second [to get the correct gravity assist from Jupiter], our third stage will beat us to Jupiter. However, because it will not hit the Pluto aim point, it will not beat us to Pluto. (Which is a relief — can you imagine us being the second to arrive at Pluto after all this, having been beat by a derelict Boeing upper stage?) In fact, because the third stage cannot trim up its trajectory, it will not cross Pluto's orbit until Oct. 15, 2015. And when it does, it'll be about 200 million kilometers (roughly the distance from the Sun to Mars) from Pluto.What's amusing is that the derelict upper stage will only be a few months behind the New Horizons probe. The first piece of space junk to leave the Solar System, perhaps?
Tuesday, January 24, 2006
Three More Observations Towards A 2005 Top Ten Films List
Between Netflix and an actual trip to the movies last night, I've recently seen the following 2005 releases.
1. The New World. I should probably consider Terence Malick's Pocahontas film part of the '06 viewing proper, mainly because it was only shown on 3 screens in '05 — obviously, none in Madison. I saw this with Colleagues A and B whose '05 lists were posted last week, and I must admit that I hadn't been paying too much attention to the reviews or other promotional material, as I was expecting Colin Firth instead of Colin Farrell. Oh well.
Neither of the colleagues particularly cared for Malick's previous film, The Thin Red Line, which I liked (none of us has seen TRL since the theatrical screening). Malick's visual style, spending lots of time with nature relative to the actual action of the picture, is barely on the right side of pretentious wanking, but since I am (as the saying goes) a pretentious wanker, that didn't bother me so much. The colleagues thought the languorous pace and philosophical voiceovers worked better here than in TRL, where it all seemed incongrous or inauthentic to the Guadalcanal battle experience.
I was moved to read up a bit on the relevant history late last night, which imparted a negative reaction after the fact: Malick seems to have taken some not insubstantial liberties with the available historical evidence, when the fictionalized relationship between Smith and Pocahontas is not obviously as interesting as either an interpolated "truth" or (as the Post's Stephen Hunter notes) a scabrous portrayal such as that in John Barth's The Sot-Weed Factor. Bottom line: We (i.e., Anglo America) suck, but we're persistent. What else is new? I doubt it'll stay in the top ten of either '05 or '06, once I'm caught up with my viewing, but it was worth seeing. Did I mention admission was $3?
2. Broken Flowers. Call it the fourth film in a so-far tetralogy in Bill Murray's career of playing middle-aged men who are "morbidly depressed," as Oscar Madison put it in a largely negative blog review. Now, I loved Rushmore and Lost in Translation and was mostly annoyed by The Life Aquatic with Steve Zissou. Here, I thought Jim Jarmusch's portrayal of the anticipatory boredom punctuated with brief terror involved in meeting up with an ex after many years mostly rang true — at least, that's what I remember from the last time I did anything remotely similar, back in the mid-90s. (In contrast, Malick's lyricism in TRL rang distinctly false against my Marine medic grandfather's descriptions of the sights and sounds of narrowly avoiding being blown to bits at Iwo Jima.) Jarmusch could have made what a viewer might presume to have been a livelier past for the Don Johnston character leap to the screen a bit more. At least it made for some discussion with Suzanne as to how much subtext there really was in the film.
3. Charlie and the Chocolate Factory. This was actually the first Tim Burton feature I'd seen all the way through since Ed Wood (1994); I'd caught bits of Mars Attacks! on hotel cable sometime in my business travel career, and thought Burton had dropped the ball on an otherwise amusing convept (since resurrected, after a fashion, in the videogame Destroy All Humans!). Burton's production design tics in conjunction with twenty-first century digital effects are well-suited to the material, even if I prefer Gene Wilder's Willy Wonka to Johnny Depp's freakish portrayal. In the end, I just didn't care so much whether or not the Bad Kids got theirs, or whether Charlie got his, for that matter. Then again, I could say the same thing about that kid at wizard school — especially as it becomes obvious that some currently well-compensated child actors should be sure to engage talented financial planners for the long haul — and Tim Burton does have something resembling a coherent visual style. Maybe slots between Revenge of the Sith and Revenge of the Sith ex-all the Anakin and Padmé crap.
Lunchtime Notes: Dept. of Dubious Inflation Data
One of last week's winning Wednesday Whines, from Camera Obscura, noted the inadvertent transmission of the remarkably large sum billed to her insurer for a few seconds' gynecological procedure that you can read all about at your own risk.
Our insurer routinely provides us with such information, but I hadn't paid much attention to the end-of-year round of 'explanation of benefits' forms since we'd grossly underestimated how much we needed to contribute to our annoying flexible spending account. Then the copayment bill came for a variety of end-of-year visits, including the kids' well-child checkups and a gaggle of ear infection visits — $200, thank you very much. An interesting observation is how they billed a couple visits in which the kids had been doubled-up (i.e., the doctor peeked in both their ears): One tier of office visit charge for one, a second tier for the other (priced around 75% of the first). The pediatrician's effective hourly charge must approach that of Camera Obscura's gynecologist in this case.
The copayment structure, meanwhile, gives us an effective coinsurance rate of about 20% for the first kid and 27% for the incremental kid, which seems perverse as the actual incremental cost of the incremental kid is very low.
We are, like many employer-insured Americans, bearing rapidly increasing amounts of our health care costs out-of-pocket. Yet a graph of official consumer price (CPI) inflation for medical care at Angry Bear (a description of the BLS methods is here; their methods are supposed to measure changes in out-of-pocket expenses) suggests out-of-pocket medical care costs have moderated since the early nineties, and currently are barely exceeding official inflation in everything else but health care.
What I want to know is, who are the lucky souls who get to experience less-than-4% annual increases in their out-of-pocket health care costs?! For you see, in order to keep our premium inflation just in the low double digits, our out-of-pocket expenses have increased quite rapidly. Three years ago, those visits would have cost us $100; $150 in '04, and $250 this year. I'd think the rates of increase would be even higher for consumers in plans that had historically been more heavily employer-funded than ours, which would seem to be on the bow shock of the health care cost-shifting trend.
The methodological details are a bit mind-numbing, but I'm wondering where the real health care inflation has gone. Any takers?
Monday, January 23, 2006
The Medicare Part D "Donut Hole" Is Bad; The Medicare Web Site Execution Is Incompetent
There's a very good series on the Medicare prescription drug benefit (a.k.a. Medicare Part D) by Michael Hiltzik at the L.A. Times blog (also linking to an earlier, and also excellent, article in the series from last week). Take your blood pressure meds and read it.
One seemingly shocking observation from the article, also excerpted by Kevin Drum, isn't quite what it seems to be, though. Hiltzik, apparently using the plan comparison feature on the Medicare web site, priced supplies of the osteoporosis drug Actonel, and found a typical monthly price — as a beneficiary in the coverage-free "donut hole" might experience — of around $500, with considerable variation by plan. That compares to around $70, cash, from various Web-based suppliers.
The health care system may be f***ed up, but it's not that badly f***ed, yet.
The culprit turns out to be the Medicare web site. Potential beneficiaries can fine tune drug plan cost comparisons, which otherwise are all but useless given the multiplicity of choices and out-of-pocket cost parameters, by specifying the medications they routinely take. Users may then enter specific dosage information, or let the site base its cost comparison on typical dosing amounts. The dose used by default for Actonel is 30 35-mg tablets. However, 35-mg Actonel is taken weekly, so this is a database error specifying 7.5 times the normal dose. Since Actonel pills are rather expensive, this is a big error. In the site design, a user would have to scroll past various plan information and notice the crazy monthly quantity to figure out that something was amiss.
The error, as it turns out, isn't obviously innocent. Having input my ZIP Code and Actonel and Lipitor as medications to be costed out, the defaults yield a low-cost plan with annual costs of $1,407, with the next least expensive plan costing nearly twice as much out of pocket. What a deal! But using the correct dose, the low-cost plan was around $750, and the $1,407 plan under the default scenario was... still $1,407, but now one of the more expensive options in the lengthy menu.
Somehow, I can just imagine that among the other pieces of wreckage, there will turn out to be some bad ex-post choices of drug plan out there.
Do Not Be Alarmed
If you hear screaming around 5 P.M. Central Time today, it's probably just John finding out that the Thomas electric train layout has, like the Christmas tree under which it formerly ran, been disassembled for the season. Otherwise, call 911.
His initial reaction to the one-week warning that the house was going to revert to pre-holiday décor: "That's not a good idea!"
Please Mr. Jobs
I still love my old 400MHz PowerBook G4 (one of the original titanium models), even though it's now 368 in Mac years. Zipped into its neoprene carrying sleve, it just makes it into my briefcase, and is just light enough that I don't curse it if faced with a maximal change-of-planes hike at Northwest's Detroit terminal.
But Sir Ed's search for a replacement for a Sony Vaio ultraportabe that's 653 in PC years — boiling down to a choice between a Pentium M ultraportable, and a still very portable Core Duo model not yet available for order — highlights a longstanding shorcoming in the Apple notebook lineup. Make no mistake: You get an awful lot in six pounds' worth of lugged MacBook Pro. But a careful glance at the specs suggests shows that the MacBook has expanded in the X and Y dimensions even as it's contracted in the Z. Plus, not cursing one's laptop's weight is not the same as enjoying a true featherweight.
So here's the deal. Other divisions of Sony may be techno-screwups of the first order. Nevertheless, it would not be a bad idea to occupy their subnotebook dimension points with future MacBooks. The somewhat portly 12" PowerBook's design can be put out to pasture. Call the four-pound widescreen replacement the MacBook mini or something like that, and add a diminutive MacBook nano with the Core Solo chip for geeks who can remember the old PowerBook Duo. My own balance of portability versus function would have me all over the 'mini.'
Signed, a once and possibly future road warrior.
Sunday, January 22, 2006
Crayolas Gone Wild!
I was enjoying a little coloring session with the boy during TV-free yesterday (reversion to mean: Julia is watching Blue's Clues while I blog), and was presented with a crayon and a request to identify the color, a slightly warm gray. I spin the name into position:
OK, W is for wolf in the beloved Northwoods alphabet book. But that was not all. We came across "granny smith apple," a green a shade or two lighter and yellower than just plain green, but darker than any Granny Smith apple I've ever seen. The winner for figurativeness in the box-of-48 was "purple mountain's majesty," a reddish medium blue, with no objective relationship to the other purples I can identify. Someone at Binney & Smith has a lot of time on his or her hands.
Astoundingly, Crayola crayons are (for now?) made in the U.S.A. Not that I'm morally opposed to imports or anything, but apart from the LEGO collection (*), there's darn little in the collection of children's distractions that's made in the developed world.
Coloring on a sunny morning...
(*) And even LEGO production is migrating to Eastern Europe and low-wage parts of Asia in search of lower wages and, presumably, more relaxed labor regulations. Those wildly expensive TtFTE wooden railway engines? Made in China.
(Welcome, NYT Walk-Through readers. Some other mostly-Madison real estate posts are linked here, or look around.)
Yesterday's Capital Times reports that one of Madison's Frank Lloyd Wright-designed residences quietly changed hands in the fall. The Robert "Robie" Lamp House, built in 1903, sold to a developer for $470,000. It needs work. The likely fate, for the time being, is to be restored as part of a condo development involving some adjacent properties on East Mifflin St. also owned by the developer, who does seem to realize that he has a responsibility to treat the house well.
You can rent the house for $1,400/month as of February. Call 608-255-3753.
This also highlights why the official inflation data for housing have been screwed up of late. The owner-occupied housing component of the Consumer Price Index is constructed by reweighting a sample of rents to represent the owner-occupied housing stock. The basic idea, which is not unsound, is that the rent an owner could get for the house (and is, in effect, paying to him or herself) represents the consumption, versus investment, component of home ownership.
The method has two practical problems. First, in much of the country, the owner-occupied housing stock resembles the rental housing stock so little that it's a stretch to make some small subset of rented houses represent the owner-occupied units. This would be expected mostly to affect the statistical efficiency of the estimates — because there are few rental units to represent large segments of owner-occupied housing — but could lead to a bias if there's really just no way to reweight the rentals into a valid representation of owned houses.
Second, it's a leap to suggest that market rents necessarily constitute "rational" rents for the owner-occupied housing. In the case of the Lamp house, the $470,000 could be put in a money market fund and earn nearly $1,600/month. Alternately, a purchase hypothetically financed by a no-money-down, interest-only loan at 6% would set a Wisconsin-resident owner-occupier in the 25% Federal income tax bracket about $2,250/month after tax deductions, with the property assessed at 100% of the transaction price; which doesn't include maintenance or other housing "consumption" expenditures. In short, it's not a great deal to pay $470,000 to be able to collect $1,400/month rent. (Of course, the developer-owner's motivation is unusual in this case, though it's not unreasonable to believe that the transaction price wouldn't have been much different with an owner-occupier.)
That there's undoubtedly an FLLW premium in the Lamp house's price over what you'd normally get for a 1,660-square foor downtown house doesn't necessarily help matters for the CPI. That is, paying an FLLW premium that doesn't translate into higher market rent could easily be construed as consumption of a status good.
It's been noted, for instance by Steve Kyle in the MaxSpeak comments, that there isn't reason to suspect systematic long run bias (with the emphasis on long run) — what goes too far up can and usually will come back down. However, the apparent short run bias is not negligible when it's taken low measured inflation to make some key quality-of-life measures (wages, for instance) appear merely poor instead of terrible.
Saturday, January 21, 2006
Believe Me, It Doesn't Happen Every Day
Amount of television watched by the children today: None.
This way, we won't feel so guilty when we pop in TtFTE or Blue's Clues tomorrow morning during Julia's nap so we can actually read the Sunday papers on Sunday.
Murphy's Laws of the Locker Room
1. No matter how large the locker room, or how empty the gym, someone will need to get into a locker adjacent to yours while you're changing. (Alt.: you must wait for a traffic jam to clear before changing.)
2. Given suitable gym and workplace demographics, you will eventually see your boss or some other senior colleague naked, or vice-versa. Either way, it is somewhat embarrassing.
Today's trip: A two-fer. (Senior colleague, contributing to the traffic jam, for #2.)
Inside The iTunes Library
Via Angry Pregnant Lawyer.
Total number of tracks in iTunes
Sort by song title
First song: "A Serious of Snakes," Wire
Last song: Zombie Love, The Jazz Butcher
Sort by time
Shortest song: 0:16, Recitativo from Act II, Scene III of Handel's Alcina
Longest song: 19:38, Without Mercy 2, The Durutti Column
Sort by artist
First: The 6ths (various mostly indie artists performing songs by Stephen Merritt of Magnetic Fields), San Diego Zoo
Last: はっぴいえんど (a bunch of Japanese characters, which your font library may or may not display), Kaze Wo Atsumete (from the "Lost In Translation" soundtrack)
Sort by album
First: #1 Record/Radio City, Big Star
Last: World Clique, Deee-Lite
10 most played songs
1. The Jesus and Mary Chain, Happy When It Rains, Darklands
2. Cocteau Twins, Carolyn's Fingers, Blue Bell Knoll
3. The Jesus and Mary Chain, April Skies, Darklands
4. The 6ths, San Diego Zoo, Wasp's Nests [a good song, but played unusually often on the iPod due to a firmware bug in the old car's iPod adapter]
5. The Jesus and Mary Chain, Down On Me, Darklands
6. The Jesus and Mary Chain, The Hardest Walk, Psychocandy
7. The Stone Roses, Mersey Paradise, The Complete Stone Roses (singles)
8. The Wedding Present, Every Mother's Son, Tommy
9. Belly, Red, King
10. Belly, Now They'll Sleep, King
First five songs that come up on Party Shuffle
1. Sandie Shaw, Please Help The Cause Against Loneliness, Hello Angel [British pop star idolized by Morrissey, backed by members of the Smiths]
2. Primal Scream, We Go Down Slowly Rising, Sonic Flower Groove
3. Revenge, Pineapple Face (LP Version), Pinapple Face (CD-single) [Side project of New Order's Peter Hook]
4. The Folksmen, Skeletons of Quinto, A Mighty Wind Soundtrack [clears out the party]
5. Air, Kelly Watch The Stars, Moon Safari
Number of search returns for:
10 last played
1.-6. Six songs from Pale Saints' "In Ribbons"
7.-9. Three songs from New Order's "Movement"
10. Momus, The Hairstyle Of The Devil
Friday, January 20, 2006
Temporarily, at least.
IOWA-DANE-LAFAYETTE-GREEN-I am glad that my previous whine saw such a thorough response from the weather gods, but it's been ridiculous, really. On the plus side, the new car aced its first winter weather challenge. However, the late news will most surely bring many tales of woe from people who forgot that the number of drive wheels has no particular effect on the ability to stop.
INCLUDING THE CITIES OF...DODGEVILLE...MADISON...DARLINGTON...
440 PM CST FRI JAN 20 2006
...SNOW ADVISORY IN EFFECT UNTIL MIDNIGHT CST TONIGHT...
.TONIGHT...SNOW IN THE EVENING...THEN CHANCE OF FLURRIES AFTER
MIDNIGHT. TOTAL SNOW ACCUMULATION OF 3 TO 4 INCHES. LOWS IN THE
LOWER 20S. NORTH WINDS 5 TO 10 MPH.
Meanwhile, I skipped the usual after-work trip to the gym and am instead enjoying a martini here with the family.
Update 6:45 P.M.: Massive diaper blow-out! Idyll shattered!
One Good Thing About The Medicare Part D 'Donut Hole'
A couple months ago, I'd had a brief blog debate with my good friend Jeremy Freese over the degree of pathology of the 'donut hole' where the new Medicare prescription drug benefit provides no coverage for a range of out-of-pocket expenses; I'd argued that it was worse than Jeremy had made it out.
That was, of course, before the massive clusterf*ck that's accompanied the rollout of the benefit. (Among other things, it serves as a reminder of the power of DeLong's Paradox: The Bush administration is always worse than you think, even after accounting for the fact that it's worse than you think.) The particular timing of the rollout is such that there should be legions of pissed-off senior voters either in, or with fresh memories of, the 'donut hole' — among other pathologies of the program structure — just in time for the midterm elections.
Of course, Democrats must both successfully remind voters whose brilliant idea the whole thing was, and offer a coherent alternative. In this regard, we have to give snaps to Jamie Wall up in the WI-8 for having issued a press release noting the impending disaster and offering a substantive Medicare Part D reform platform last December 12. Way to get ahead of the issue! Wall usefully focuses on using Medicare's purchasing power to reduce prices, though he's arguably a bit under-focused on the inefficiencies associated with private administration of the benefit — a theme of this morning's Krugman column (Times Select subscribers), excerpted at Economist's View for non-Times Selecters.
Thursday, January 19, 2006
Lunchtime Notes: Light Reading
Journal of Health Economics, vol. 25, no. 1 (2006)
T. Buchmueller, "Price and the health plan choices of retirees"
K. R. Brekke and M. Kuhn, "Direct to consumer advertising in pharmaceutical markets"
F. Benstetter and A. Wambach, "The treadmill effect in a fixed budget system"
RAND Journal of Economics, vol. 36, no. 3 (Autumn '05 — not sure why this just reached us now)
S. Borenstein and S. Holland, "On the efficiency of competitive electricity markets with time-invariant retail prices" (possibly a little gloss on one of the ideas in the late California Prop. 80)
P. Grout and I. Park, "Competitve planned obsolescence"
T. Lyon and J. Mayo, "Regulatory opportunism and investment behavior: Evidence from the U.S. electric utility industry"
J. List and M. Price, "Conspiracies and secret price discounts in the marketplace: Evidence from field experiments" (what better paper to be co-authored by List and Price, eh?)
The Onion Is A Priceless National Treasure, IV
Electronic babysitter edition.
Hedge Funds and Executive Pay Excesses
Bryan Smith sends a link to the Jesse Eisinger W$J article (works for non-subscriber me; YMMV) on executive compensation excesses previously referenced here. An additional angle it pursues, in addition to highlighting Lucian Bebchuk's recent research on the startling magnitude of top executives' compensation, is suggesting that hedge fund managers could and should do something about it,
but given how much they pay themselves, they don't make great poster children for the outrageous compensation issue. And many think there isn't enough value being destroyed by top-executive compensation to really make a difference.My snarky take, which I suspect would withstand some actual analysis, is that hedge fund managers' fees are such that they're dependent on a class of investors with so much money that they don't miss 20% of their returns (*). There may be a degree of co-dependency, even, as managers working some hedge fund styles have incentives to throw money at executives to get deals done, and the "all the executives are above average" ratchet mechanisms take over.
Interested folks might also take a gander at an article in Legal Affairs by David Skeel, Behind the Hedge, describing some of the history of the hedge fund business and remarking on some fund activities that might be good for their investors but not obviously for the 'markets,' let alone society at large.
Skeel notes that the standard 20% incentive fee for hedge fund managers — i.e., they receive 20% of the funds' net positive returns (**) — is a byproduct of the fee structure for the original hedge fund, founded in 1949. Insofar as there is nearly no variation in incentive fee structure, that may be a more enduring feature than the original hedging strategy itself. Indeed, the lack of variation in hedge fund fee terms despite mammoth entry seems to bode ill for anyone (see: SEC Chairman Cox) who thinks that competition alone will rectify excessive compensation problems.
(*) In addition to management fees that are high by the standards of smarter mutual fund choices.
(**) If funds earn negative returns, managers typically don't receive further incentive pay until the fund reaches the previous high-water mark. The general lack of disincentive pay for negative returns, combined with managers' ability (which some use) liquidate their funds and start over rather than earn their way back to distant high-water marks, makes for a less than ideal set of incentives.
Darn That Dog And Those Teeth!
Ballistic missile defense interceptors are so feckless that even the Bushist Defense Department scales back deployment for additional testing.
Wednesday, January 18, 2006
Top Ten Movies
My see-every movie colleagues sent along their top ten lists for 2005. Stuff I've seen is in bold italics.
Here is [Colleague A's] top ten list for 2005:
1. Brokeback Mountain [Suzanne and I will see this in what looks to be an extended theatrical run]
2. Munich [I don't think I can see this with Suzanne, but my mother says it's excellent, too]
3. Walk the Line
6. Memoirs of a Geisha
7. North Country
9. History of Violence
11. Shop Girl/Broken Flowers (*)
Worst movie of the year: Longest Yard.
[Colleague B]'s top ten for 2005
1. Star Wars Episode III
2. Sin City
3. War of the Worlds
4. Cinderella Man
5. Harry Potter
6. Walk the Line
8. Batman Begins
10. Hustle and Flow
11. Wedding Crashers
Worst: Yes [according to the IMDB, released in 2004, but some things will continue to reach Madison slowly until the new Sundance multiplex is built.] and Me, You, and Everyone We Know.
I leave it to the reader to figure out which colleague is the gun-loving Republican and which has a collection of Star Wars action figures that makes my collection of Star Wars LEGO look like nothing.
It turns out that I've actually seen more than 10 movies this year. A full list will require additional memory-jogging, but here are a few that spring to mind. Movies I liked are marked with an asterisk.
Enron: The Smartest Guys In The Room (*, though Colleage C was rightly irritated that the film characterized weather hedges as crazy voodoo stuff)
The Upside of Anger (*)
Wallace & Gromit in The Curse of the Were-Rabbit (*)
The Aristocrats (*)
The Hitchhiker's Guide to the Galaxy (*, but needed more Vogon poetry criticism and less Vogons otherwise)
Two For The Money (my antipathy towards gambling extends to movies about it)
Flightplan (even Jodie Foster's presence can't save this thriller from its essential silliness)
Dog: A Continued Biting Threat To Man
Many of you will have seen this elsewhere, but it's important enough to bear repeating here.
The Bush administration's illegal NSA domestic spying program wasted federal agents' time checking out thousands of innocent Americans.
Retractions will be accepted from commenters who repeated Administration spin that the program was limited to individuals with links to Al Qaida.
Tuesday, January 17, 2006
Lunchtime Notes: Dog Bites Man
Personal bankruptcy filers are in deep financial trouble.
Economics Comedy Gold
The Chamber of Commerce's "Economic Impacts of Mandatory Sick Leave Ordinance" report, which the Chamber stands behind except for the screwed-up calculations, is just the gift that keeps giving. A few quick morning whacks (quotes from the report in purpletext):
This is not the first instance where the City Council has mandated policy on Madison businesses. (p. 4)
No kidding! Probably not the last, either.
Many social policy initiatives are promoted with less than perfect information, or worse, are based on biased or selectively supportive information bits. (p. 4)
Mr. Pot, meet Ms. Kettle.
In fact, the overall economic impact on Madison has not shown up directly in the economic growth numbers. However, at the business level the effects are real. (p. 4)
They're campaigning for the Purple Teardrop with Clutched Pearls award, I see. Makes you wonder who's patronizing the new Jaguar dealer (O.K., nobody, given their current product range, but you get the point). The usual — i.e., supported by the data — story is that the positive economic headlines have mainly reflected good times for business interests and the rich who hold most of the equity, while digging through the details shows conditions have been less favorable for ordinary workers.
Other states have employee sick pay programs that are far less costly and do not put businesses at a competitive disadvantage. For example, California has a fund for worker sick wage relief that is funded by employees. It costs each worker just $27 per year. (p. 6)
Hard to say what this refers to, in the absence of a citation, but I guess it's the California Paid Family Leave insurance program. The report doesn't mention that while the PFL program is useful, it's not remotely equivalent to sick leave in that there's an unpaid waiting period, routine illnesses are ineligible for coverage, and there's no right to take leave.
Educate don’t Legislate [sic] (p. 7)
Economists shouldn't try to channel the Rev. Jesse Jackson. Period.
[continuing directly] Mandatory benefits packages hurt progressive, responsible companies by decreasing their competitive advantage of flexible and responsive compensation offerings. Studies have shown that giving employees time off for family wellness needs is cost effective for the firm.
Darn that city for trying to force blockheaded business owners to take away the competitive advantages of their more enlightened competitors! You might think that if providing time off is "cost effective for the firm," the subsequent analysis of business profitability might show something to that effect. It doesn't.
Monday, January 16, 2006
Monday Toddler Extra: I Can't Think of a Theme, So Here Are Some Pictures of My Cute Kids Edition
If I were to have given John a cute pseudonym, like Corndog's Dread Pirate Toddler, Angry Pregnant Lawyer's Angry Boy, or even Prof. B.'s Pseudonymous Kid, I'd have chosen "Ming the Merciless" for his insistence on constant Daddy labor in service of the expansion of his personal space fleet. Here he is, lounging with the latest addition (clearer pictures will soon be available here for the LEGO geeks in the audience; it's loosely based upon this concept art).
Meanwhile, Julia is very much into this particular pair of mittens, and has added a convincing growl to her very rapidly growing vocabulary (even though I don't think pink mouse-like critters actually growl).
Madison Employment in the "Leisure and Hospitality" Industry
When last we left the Chamber of Commerce's disgraced hatchet job (get a copy here at Dane101.com) on the proposed Madison sick leave mandate, we had observed that its mostly off-topic section on the employment effects of the Madison smoking ban had failed to use city-specific data and, more importantly, had appeared to have chosen an employment series more for rhetorical effect than relevance. I promised graphs, and here they are.
First, here's a graph with the "leisure and hospitality" employment growth series used in the Chamber's report, along with two more narrowly defined series — each more closely targeted to the bars and taverns that would be expected to bear most of any employment effect from the ban.
(Click the picture for a full-size version.)
An interesting feature is that employment growth for the "leisure and hospitality" sector and the subsets including food service establishments and drinking places diverged before the smoking ban took effect.
Here are the employment data from which the growth rates were calculated.
A few things to note. First, the "food service and drinking places" industry accounts for the lion's share of total leisure and hospitality employment. The "leisure and hospitality" aggregate seems to show more pronounced summer peaks than the subgroups. They all appear to have a mild upward trend. The peak in 2004 seems to be unusually high for the aggregate, and the peak in '05 seems high for the "food service and drinking places" series. Meanwhile, "leisure and hospitality" excluding accommodation and food service is unusally low in the fall.
The residual classification is "arts, entertainment, and recreation" (which includes amusement and gambling industries), and I would have to defer to someone with more local labor market expertise to know if there's a story there. I can't think of an obvious source of a contraction in that category in the city, so if there's no story, I'd think... outlying data.
That's not the implication the CoC study wants you to draw, of course.
You should also read Ben at Badger Blues, from whom I was channeling the "hatchet job" theme.
(A spreadsheet with the source graphs, underlying data, and BLS series identifiers is here.)
Hatchet Job, Cont'd.
One thing that highlights the pound-the-table (*) nature of the Chamber of Commerce's infamous sick leave study is that it spends a page and a half of a sixteen-page report (including the cover!) re-arguing the Madison smoking ban and purporting to show, using BLS data, "unprecedented" employment declines in the "leisure and hospitality industry" associated with the ban.
There are two problems with the analysis. First, the data from the Current Employment Statistics (CES) survey are for the Madison MSA, not just the city (remember that?), and in associating employment growth changes with city policies, the report shows no evidence of understanding the distinction. (The graph is introduced by a sentence reading, "Hospitality industry (the industry that includes hotels, restaurants, bars, etc.) has declined dramatically in Madison since the smoking ban took effect.")
The bigger problem is that more appropriate selections of "industry" paint a much different picture. CES data do indicate that "leisure and hospitality" employment declined 6.6% in November '05, the most recent data, versus November '04.
However, in the "accommodation and food services" classification — a subset of "leisure and hospitality" — the year-over year employment increased 4.0%. The arguably even more relevant "food services and drinking places" classification shows an employment increase of 5.6%.
Graphs to follow once I have time to get the raw data into Excel.
Month-to-month employment changes for an area such as Madison need to be taken with a grain of salt, as the data are sample-based and subject to considerable variation even for an unusually large sample like the CES. But the appearance is that the data series was chosen to prove the Chamber's point on the smoking ban.
Meanwhile, Brenda Konkel rightly notes the report's general tone of callousness.
(*) Remember the old saw about lawyering: When the facts are on your side, pound the facts; when the law is on your side, pound the law; otherwise, pound the table.
Sunday, January 15, 2006
The Sick Leave Study Flap and the War on Science
It's an occupational hazard, sure, but my first reaction to the revelation of massive screw-ups in the Greater Madison Chamber of Commerce's study purporting to demonstrate enormous costs associated with the paid sick leave ordinance proposed for the city was irritation that the Chamber and the study authors were giving "hired gun economists" a bad name.
I don't begrudge the Chamber having a position it wants to advocate. It's not even totally indefensible in principle, as mandating something that's (other things equal) a pay increase for some workers will have a variety of costs that theoretically could exceed the benefits. The hackwork is what I can't abide.
Unfortunately, the world is flush with hackwork, as Chris Mooney describes in The Republican War On Science, the current reading material of the not quite forgotten (*) Marginal Utility "Book Club" (**). Much of Mooney's early emphasis, discussing the Republican reaction to the science behind global warming, is on the improper exploitation of scientific uncertainty — litigation strategy 101 when the weight of the evidence is against you but you don't want to go along with it.
Since economics is unusually blessed with analytical uncertainty, the smokescreen option is almost always available. From a quick look at the executive summary of the report (thanks, Brenda Konkel, for providing a copy), the Chamber opted for pure hatchet-job. On the plus side, those are relatively easy to spot, versus controversies of the "two PhD's disagreeing with each other about bias and variance" sort.
Since there are significant elements (even in Madison!) primed to believe that any regulatory intervention in the "free" market will lead to floods and pestilence — see Susan Lampert Smith in today's State Journal for an uncharacteristically canny take — it may not have struck anyone that the headline results failed the laugh test.
Now off to read the study... Meanwhile, interested parties should read Max Sawicky at TPMCafe on the Maryland health insurance law as a placeholder.
...early howler, a "profitability" bullet on the executive summary page describes a "typical" retail business making a profit of $0.20 per $100 in sales shifting to a loss of $0.56 per $100 due to the sick leave mandate. Do they expect me to believe that a typical retail business has a net margin of 0.2%?? By advanced math, that's $2,000 profit on $1,000,000 in sales. Last time I checked, many proprietors of small businesses could actually eat and keep roofs over their heads. Another decimal place error, I suppose.
(A follow-up post is here.)
(*) Brayden, I'm really going to post something on Accelerando someday!
(**) As literature, it's a little too bloggy, perhaps. It arguably would be better presented as a hypertext that could use intratextual hyperlinks to avoid much use of "aforementioned," or otherwise Mooney's editor should have had more faith in book readers' ability to remember details over the span of pages or even chapters!
Saturday, January 14, 2006
Saturday Morning Housekeeping
In honor of International De-Lurking Week, I've added some more links to the sidebar:
Corndoggerel, which was on hiatus at the last round of additions or it would already have been linked, which is a central node of what I'd otherwise call the Scribblersphere. Visit for the '70s music reviews, stay for Captain Entropy and Dread Pirate Toddler. Or is it the other way around?
Mixter's Mix, back from hiatus, is back in the Locals section.
Playing School, Irreverently. The tenure-track adventures of Profgrrrrl, perennial winner of the Wednesday Whining "Most Stylish Whine" award.
Are you lurking? If so, leave a comment, say hey, tell me what (else) you're reading, eating, or building. Otherwise...
(Graphic courtesy of Paper Napkin.)
Last, a technical note for readers of Marginal Utility via Bloglines, where I've accumulated a multiplicity of feeds for no reason of my direct action. A couple of them seem to suffer from technical difficulties such that recent activity doesn't show up in a timely fashion. Subscribing to this feed (if you are not already doing so, which most of you aren't) may improve your experience until I have time to play around with Julie's Feedburner tips.
Friday, January 13, 2006
Lunchtime Notes: Mandatory Sick Leave, Not So Bad for Madison After All?
The enormous-type above-the-fold headline in this morning's Wisconsin State Journal blared, "Sick leave law study has major flaws." An analysis of the potential costs of mandating nine days of sick leave by a cross-town consultancy, commissioned by the local Chamber of Commerce, shifted a decimal place in calculating lost property tax revenues and thus overstated the city's lost revenue by an order of magnitude — $21 million (huge hole in city budget) vs. less than $1 million. That's gotta hurt.
I've thought that the sick leave mandate was a bit on the generous side — I don't get 9 days of "sick" leave" (*) — but the WSJ story offers a detail on how the requirement can be met (that I'd previously missed) that changes my mind:
It would cover employees who work at least 12 hours a week, exempt businesses with fewer than five employees, and count any sort of leave - vacation, sick or personal time - toward the requirement. [emphasis added]My employer, for instance, provides a newly hired full-time equivalent employee with eighteen days of eligible leave — twice the mandate. So establishments offering standard annual leave packages would easily meet the mandate's requirements and be substantially unaffected. The main exception would be places that don't offer their part-timers pro rata leave benefits, or possibly which play games with pseudo-temporary employees to avoid certain employment costs (**).
Clearly, the effect will be concentrated in sectors of the service industry where part-time work with minimal benefits is central to the business plan. Even here, it shouldn't take too much imagination to see how the cost of providing the leave can be offset with benefits in employee morale (and hence productivity) and retention.
When the study re-appears with its arithmetic fixed, it will be interesting to see if any such effects were considered.
Addendum: See also Lisa Subeck and Badger Blues.
(*) The ordinance would require eligible employees to be provided with one hour of leave per 30 hours worked, or 8-2/3 8-hour days for a 2,080-hour work year.
(**) Regarding which, I'm a long-standing doubter that such arrangements are necessarily efficient after productivity losses and turnover costs are considered.
A Better Use for Those Letters?
Seen on the net:
ICBM (or iCBM) = Intel Chip Based Mac.
Always Low Prices on Natural Foods?
Kim Weeden, quasi-guest-blogging, sends along this item from CNN on food trends for 2006. Organic foods, one of the few big growth opportunities for the food industry, will continue to grow rapidly...
"As a result, more companies will enter the organic space," he said. Sales at the number one natural foods retailer Whole Foods (Research) have been on a tear, but the chain will soon be in for some stiff competition, most notably from Wal-Mart (Research), the biggest grocer in the U.S.Kim's comment:
That retailer already sells a limited range of organic products like brown flour, packaged salad, carrots, tomatoes and milk, and indicated its intention to become a premier retailer of natural foods at its October, 2005 analysts meeting. "That's why we are expanding our organic food offerings," John Menzer, who heads the retailer's U.S. stores.
Whole Foods facing stiff competition from Wal-Mart? This statement strikes
me as remarkably naive about the social dynamics of consumption. People who
shop at Whole Foods don't do so because Wal-Mart lacks a good organic
produce aisle: they shop at Whole Foods in part because it's an event, it's
a place to network and be seen by like-minded friends, and it's an
expression of a particular lifestyle. I'd guess that most Whole Foods
shoppers avoid Wal-Mart like the plague, because shopping at Wal-Mart would
be a social faux pas on the order of admitting that you love Budweiser,
watch NASCAR, and have all episodes of Average Joe saved on your DVR. And,
I imagine the people who shop at Wal-Mart hold similarly disparaging
stereotypes about Whole Foods shoppers. The main points of overlap in the
consumer base are thus those that want organic products but can't afford
Whole Foods' prices; and realistically, there aren't enough graduate
students in the US to have much an impact on retail numbers at either company.
I wish Wal-Mart all the best in its efforts to make organic products widely
available and affordable to more Americans. In fact, if they are able to
increase consumer demand for organic products by increasing the supply of
such products, and to encourage more farmers to "go organic," more power to
them. But barring a major shift in either company's corporate image,
Wal-Mart is far more likely to create new consumers for organic products
among existing Wal-Mart customers than they are to steal Whole Foods'
I agree with Kim that there shouldn't be much fear in Austin over Wal-Mart's move into organic foods. Among other things, I doubt the Whole Foods practice of buying produce from local artisanal producers — which gives them not insignificant credibility to get actual foodies in the door — translates into Wal-Mart's purchasing model. A few other comments from the economist's side.
1. I'd like to believe that demand curves slope downwards, so if Wal-Mart can price organic foods cheaper than other grocery retailers, they ought to pick up some business from (other) competitors while encouraging some substitution of organic produce among their existing grocery customers.
2. Offering premium products like organics would, in principle, give Wal-Mart an opportunity to profit from less price-sensitive customers, assuming organics have a higher mark-up than conventional produce. Does Wal-Mart have any less price-sensitive customers (e.g., in areas where slightly more stylish competitors such as Target have less presence)?
3. One thing I've wondered, as more pre-packaged and processed organic foods have made their way into conventional grocery stores, is how easy it would be to commit organic certification fraud. The incentive is obviously there, given the price premium commanded by organics, and since in many cases proving a product is organic is tantamount to proving holy water has been blessed. Might Wal-Mart's famous cost pressure on its suppliers encourage fraud in earlier stages of the production process?