Marginal Utility

by Ken Houghton

I can't with a straight face tell the IRS that they are fees to a professional organization.

(This follows the original Ray of Hope noted here.)

Labels: just life, labor unions, sf, writing

by Ken Houghton

Why I Don't Read Mankiw's blog any more.

With the lack of comments, Mankiw has become a clipping service. And the problem is that he's not a good one. For instance, why read Mankiw citing Ruth Marcus (offered without comment and no comments) when one can read Thoma, DeLong, Baker, or Krugman, all of whom actually look at and discuss the evidence? Why read Mankiw on NPR's sock story, when Felix Salmon destroys the same?

Keith Hennessey may have told Mankiw to "start a blog," but he should have told him not to use Instapundit as his template. (Exception noted.)

Labels: Brad DeLong, Economists View, PortfolioMarketMovers

by Tom Bozzo

Ritholtz:

How's this for ironic: Citibank has essentially become a sub-prime borrower -- only without the advantages of teaser rates!

Labels: Bigger Places Than This on the Intertubes, High Finance

by Tom Bozzo

Megan McArdle writes:

[W]hy is America's high-speed rail so dreadful? [...] The answer is that the Acela uses existing track, which is twisty, the better to serve every congressional district between here and Boston.

The little problem here is that this was either pulled out of her backside, or perhaps more likely pulled out of the backside of a libertarian welfare recipient who'd had a few too many at some U St. bar and duly parroted on the website of the Atlantic. (The pulled quote is prefaced as part of a "discussion" she'd been in "recently.") This is linked approvingly by the theoretically more trustworthy Tyler Cowen at Marginal Revolution, where McArdle's account is smacked down in the thread's first comment. (See Stephen Karlson for the extended version.)

This seems par for the course for Ms. McArdle, but what's Cowen's excuse?

Largely unmentioned anywhere is that the correct answer to why America's high-speed rail is so "dreadful" — in our neck of the woods, we say, "nonexistent" — that is, chronic underinvestment in rail infrastructure.   Karlson makes his usual [*] point that outside of the Northeast Corridor, perfectly useful 110 MPH trains could be run over a lot of existing track with mostly regulatory changes.  But remember, for approximately the price of reconfiguring the runways at O'Hare to accommodate air traffic that may never (future path of oil prices and all) materialize, you could build 300 km or so of electrified 350 km/h line.  The French did.

Labels: Econoblogs, Glibertarianism, Trains Planes and Automobiles

by Ken Houghton

There may be a tenure-track spot available at Penn.

A former Ivy League professor pleaded guilty Monday to voluntary manslaughter for killing his wife as she wrapped Christmas presents last year....

"We started a discussion about that. The discussion was tense," Robb said. "We were both anxious about it. We both got angry. At one point, Ellen pushed me. ... I just lost it."

Labels: Economics, just life, teaching, the rule of law

by Tom Bozzo

• Shorter Charlie Stross: The fat client of today is the thin client of tomorrow? A central point of Stross's is that the transition to server-based apps is well upon us — indeed, at home, I barely fire up the likes of M$ Office except to view the odd document I pull down from the Web. He's onto something in the recent Halting State that successful server-based apps of the future will need to be distributed to avoid the scale-related usability problems endemic to those without the computational resources of the Googleborg. (I.e., servers bog down faster than the revenue stream can pay for upgrades.) That, in turn, will require vast improvements in telecom infrastructure even in parts of the world that are part of modernity let alone the non-FiOS U.S. hinterlands. Also, giving a few percent of one's mobie's processor cycles to the array of social networking apps, MMORPGs, etc., that one might end up signing up for could add up to some serious CPU loading. One thing is for sure: there is a substantial bloatware tax built into the price of most PCs.
  
• Chris Uggen gets greeted "Hello youngster" at a Lincoln dealership. Ford marketers jump out of windows. This is by way of a post speculating as to why the automotive assets of households at the 95th wealth percentile are relatively modest, according to the Fed's Survey of Consumer Finances. Chris notes an age-wealth relationship as a possible contributing factor (in the U.S., the age distribution of wealth peaks in the pre-retirement decade). It's true that the sort of cars you see middle-Americans of the white hair set driving are domestic models with steep depreciation curves, but there are status displays therein — it's just that the younger generations no longer recognize the subtleties of them. It follows that more of the Domestic Three's marketing divisions will follow Oldsmobile into the toaster. Squawking will be heard from Some — mostly franchisees clamoring to be bought out.
  
• Interesting to see the distribution of prices from a warbird dealer — from just under $2M for a Best in Show (2005 EAA) P-51D to thirty grand for a Hawker Hunter that last flew in '92. I might go for the MiG-17 at $135K with spares, even though the paint job is of questionable taste. I can only assume that the MiG-17's bargain status relative to the eye-watering Cirrus SR-22 sticker reflects the Cirrus having such features as safety, economy, and utility. H/T Cold Spring Shops.
  

Labels: computers, Random Bullets, Trains Planes and Automobiles

by Ken Houghton

FiOS description of The Big One:

PG-13. 1997. Biased documentary analyzes the idiocy of corporate layoffs in the wake of record profits, with attempts at surprise interviews with executives. Director: Michael Moore

Strangely, looking at the film, there are no attempts at "surprise" interviews.

Labels: Journamalism, mass media

by Tom Bozzo

Friends of Marginal Utility who would like to receive a piece of mail that isn't trying to sell you something or otherwise demanding money, send a mailing address to my gmail account linked in the sidebar and you will receive the Lee-Bozzo Holiday Card, this year featuring the whole lot of us! (If you've received the card in the past, you'll get one again unless you indicate otherwise; address corrections are appreciated, esp. those of y'all who've relocated to other countries.)



In contrast to the picture above, the Real Thing should feature us all looking at the camera and not sticking out our tongues.

If you want to send pictures of yourself (or -selves) and/or Adorable Offspring, Creatures, etc., send me an e-mail or see the Facebook profile for our postal address.

Labels: just life

by Tom Bozzo

• I got my introduction to Facebook's Beacon "feature" by surprise — I saw an update in my feed to the effect that I'd purchased [shoes for the boy] from [shoe-selling site]. "Oh, really?" I thought. The Beacon technology apparently lets Suzanne's online shopping feed to my Facebook profile.
• In one sense, that's not bad for [shoe-selling site] since Suzanne is a lot cooler than I am.
• However, online advertising that works on the principle of, "Hey, that cool Jimbo Jones smokes Laramie Jrs., maybe I should too!" jumps the online advertising shark. Suzanne just thinks it's freaky.
• Part of what makes it acceptable for the Googleborg to read my (home) email is that it isn't very intelligent and doesn't broadcast the results of its distillations to my entire contacts list.
• Meanwhile, Facebook's advertising seems otherwise to be badly under-targeted. Ads asking whether I'm sick of the dating scene are missing a key piece of information in my profile (i.e., "married"). Ditto the "Make $1000/day from home!!1!" ads.
  
• Fortunately, a bunch of my best blog pals are already on, since otherwise some combination of the Facebook-Fogey Taper and Peak Facebook are conspiring to keep the number of people on the site I actually know (or knew) very low. The rate of new registrations is detectable for groups as large as my college graduating class (~3,500) but not for my high school class (~120).
• Making up for the latter deficiency using Teh Google yielded some amusing news not in the alumni newsletter. One former friend sued his law school in part over the amount of text he was able to type in computer-based timed exams. Could the expected value of the remedy be worth the cost of sending the signal?!
  
• It also seems a little fogeyish that Scrabulous is coming across as the killer Facebook app.
• Adding friends who are pseudonymous in blog-world in an environment where use of real names is the norm (if an irregularly enforced norm) provides some new vistas of compromise of personally-identifying information. The question du jour is, what's the etiquette for adding pseudonymous bloggers who are, in some sense, blog-pals but who aren't "out" and whose identities you triangulate from other connections?

Labels: Bigger Places Than This on the Intertubes, social networks

by Tom Bozzo

Dep't of WTF:



Story here. I'd'a' thunk that Rudy! would be judged to have a fine head of hair before he'd be characterized as "likable."

The question is, are Democratic strategists smart enough to learn from the Karl Rove playbook and run with Joe Biden's should-be-more-famous mocking of the President of 9/11? Hope springs eternal.

Labels: Journamalism, Politics

by Ken Houghton

UPDATE: Yves Smith at Naked Capitalism corrects some of my data errors and delves a bit deeper. (See also Tom's comment.)

With the help of the now-free-if-you-Digg-It (h/t Felix) WSJ, let us see if we can rationalize some numbers.

There is a projection of 2 million (2E6) foreclosures (corrected, thank you Anonymous here) in the mortgage market over the next few years. Since most of those seem to be described as "subprime," it is reasonable to assume that they will mostly be non-Jumbo, Fannie/Freddie-eligible mortgages. That currently means their value (of the mortgage that is, not the house) is capped at $417,000. (4.17E5).

Now 4.17 x 2 = 8.34, so we are talking—absolute worst case—$8.34E11, or $834 billion. And that's if the home and the land are all worth zero, everyone took a maximum mortgage, and all two million foreclosures (corrected; see above) happen. Over the next several years.

I think we can agree that the above should be the worst-case scenario. (Even if the properties are all on Lon Gisland, that should still leave at least 50% of the value intact.)

Now, it's entirely possible that the WSJ and I have missed a few firms. But I believe most of the large ones, including Swiss Re today (h/t Calculated Risk) are represented below:



By my (and Excel's) math, assuming the Absolute Worst Case Scenario being Discussed, just under 7.8% of the Total Possible Value of the pending foreclosures (ibid.) has already been written off.

Now, I'll readily concede that some of those writeoffs may have been excessive, though Tanta makes the reasonable case (while b*tch-sl*pp*ng a deserving Peter Eavis) that there isn't much of a range of GAAP options. Some, though, may have just been the tip of the iceberg. (FYI, I have tried to keep CDO/CDS writeoffs out of the calculations.) So if we start restricting the model (assume that not all loans were for the maximum amount, or that there is residual value in the property and/or loan after foreclosure), that just-under-8% starts looking more and more as if a large share of the losses are already accounted for, with the worst yet to come.

(Please, those of you who are solvent, hit the Calculated Risk tip jar.)

So the most reasonable assumption (Entia non sunt multiplicanda praeter necessitatem) is that one of the inputs to the model is incorrect.

Note that the "model" has only two inputs to reach that $834B maximum:

1. The maximum amount a GSE such as Fannie covered since 2006 is certain, and it was never higher than that for Single-Family mortgages.
   
   
2. So that leaves the 2,000,000 expected housing foreclosures in the next few years. If you think the worst is yet to come, and you expect that the write-downs are not going to cover the entirety of the problem (some of those MBSes are stuffed into Jim Hamilton's pension fund (link added), for instance—and probably yours and mine, too), then this is the likely candidate for change.

If we believe what the banks are doing, and not what they may be saying, then that Goldman Sachs projection about the effect on collateral securities such as CDOs may look optimistic.

Unless I'm missing something, which is entirely possible. Anyone?

Labels: bankruptcy, credit, mortgage, subprime

by Ken Houghton

There are very few religions in this world* worth devotion: sex, bicycling, and soccer are certainly three.

David Hirshey at deadspin sort of combined all three.

"in this world" is deliberate; eschewing Pascal's wager in a moment of carpe diem leaves one with a manageable time scale and therefore definable Utility functions. Assuming an afterlife, or even reincarnation, throws a serious spanner into PV calculations, as the amount of time in limbo/transit/stasis/etc. cannot be discounted appropriately.

Labels: Economics, real football, Sex

by Ken Houghton

It's the Giving Season, and the Chic Gift of the Year should be One Laptop Per Child.

For T-Mobile subscribers (which apparently doesn't include people in the Madison area), or those who frequent Starbuck's (which probably does), not only can you feel good and get a machine that doesn't result in the BSoD, but you also get one year of free T-Mobile HotSpot access.

Labels: Bigger Places Than This on the Intertubes, charity, LDC, mobiletelephony, technology

by Ken Houghton

Ronald Reagan gave some support to gays and Jews, so we should ignore his "consistent opposition to federal civil rights legislation."*

I feel so much better now.

*Insert obligatory Sadly, No! footnote** here.

**‘Shorter’ concept created by Daniel Davies and perfected by Elton Beard.

Labels: Politics, Republican Party

by Ken Houghton

Fortunately, Lance appears to have the same one.

Labels: Mannion

by Tom Bozzo

But seriously, folks, it's pretty awesome. My trusty iPod Photo looks like a dinosaur by comparison.


Blogged in part from the iPhone.

Labels: Apple

by Tom Bozzo

Today was one of those crisp November days in Wisconsin that just makes you think, "Aw shucks, four months of f***ing Meteorological Winter is ahead of us." The kids were having none of that, and instead took turns pushing each other on the swing now hanging from one of the pine tree's lower limbs.


Meanwhile, John brought home his very first homework assignment from preschool!


Fascinatingly, John loves Milo for pretty much the same reason he loves us. Plus, it's the time when the beast is in search of cozy napping spots indoors:

(Cat, not actually red and green.)

Labels: just life, Kids

by Ken Houghton

Via Felix, Utah has changed enough recently that, someday soon, SLC Punk may, as with Gerald Ford's declaration about the "independent and autonomous" Poles, just have been ahead of its time.

Labels: gender bias, Sex

by Tom Bozzo

It might be funnier, if invisibly so, to maintain the purity of not blogging from new states that I visit. But anyway.

Like the unblogged Wichita visit last week, this is a whirlwind visit for business purposes that are unbloggable less because they're super-secret than because they're super-boring to nearly the entire audience of this blog. (Apologies to those of you who are the exceptions.) After skimming some high overcast en route, the approach to SLC from the north did allow splendid Wasatch Range views, right up there with the Sandia Mountains views available to air travelers to Albuquerque.

After a day spent in the industrial flatlands of the Salt Lake valley, my colleague and I were relieved that SLC does offer some weekday-after-9 P.M. dining options. For lovers of hoppy beers in the audience (you know who you are, too), I can recommend the Red Rock IPA Junior even if it's perhaps a shade less hoptastic than Bell's Two-Hearted Ale, Three Floyds Alpha King, and Madison's own Ale Asylum Hopalicious.

Labels: Meta, Travel

by Ken Houghton

Discuss your Burtons, Bartons, Baritones, and Abrotine here.

Labels: abortion, blogging, MakingLight, Meta

by Tom Bozzo

While we're All Calculated Risk, All The Time here, the Census data here on percentages of owner-occupied houses with mortgages by housing value are pretty interesting. If you wonder where people get the money for expensive housing, just keep in mind that houses worth more than $500,000 are a bit more likely than average to be mortgaged — about 76% vs. 68% overall. In some parts of the world, the mortgages probably aren't just to pay for the last kitchen remodel, either.

Now, I wonder if the Minneapolis-area luxury housing rags still carry as many ads hawking LIBOR interest-only ARMs as they used to...

(Later, maybe: blogging, or not blogging, from a New State!)

Labels: Calculated Risk, Housing Bubble

by Ken Houghton

Tanta at Calculated Risk explains that one judge believes in the Rule of Law, and, in Footnote 3, understands and explains why it exists.

The price of freedom is eternal vigilance. Good to see someone who still believes that.

Labels: Calculated Risk, Moral Hazard, mortgage, subprime

by Ken Houghton

As one would suspect:

As economic historian Niall Ferguson put it in an e-mail: “My personal preference is to sit in the back of a black chauffeur-driven Lincoln, so long as someone else is paying.”

(via Felix, who got it from Mankiw)

Labels: Economics, Trains Planes and Automobiles

by Ken Houghton

Explained just now: The Estate Tax discourages savings and investment.

Since that only leaves consumption, it would appear that the Estate Tax is sustaining the current economy. Clearly, not something we want to repeal.

Labels: Journamalism, mass media

by Tom Bozzo

As if I needed another sink for my Copious Free Time, I established Marginal Utility II over at Wordpress. Right now, it has no substantive content and is serving as a testbed for a future layout more suitable for these later Zilches that may or may not include migration to the new site. Feedback on design and usability elements is welcome.

Labels: Meta

by Ken Houghton

If I have to explain the reference, you probably think Jerry Seinfeld invented comedy.

Labels: mass media

by Tom Bozzo

Headline in the Capital Times:

MGE Gets Rate Hike Approval

Wisconsin Public Service Commission press release:

PSC Reduces Rate Request For MGE Customers

Reaction in my household:

Yip-yip-yippee! Our rates are going down!

While MGE is indeed raising its rates for plain old electrons a little (by about 0.5 cent/kWH), it's reducing the premium for zero-marginal-carbon electricity a lot (1.7 cents!). Since we have been getting 100% wind power under the old program, we'll see a fairly substantial electricity rate decrease.

Madison being Madison, MGE's clean power program was fully subscribed even at the 2.68 cent/kWH premium. Local readers should note that with the premium down to one cent as of the new year and more wind power supply coming online, this is a relatively cheap way to do something nicer for Ma Nature.

The reduction in the clean electricity premium was reportedly driven by reductions in wind power generation cost. This raises the prospect that in finite time — thanks to internalization of the external environmental cost of conventional power generation or other factors — it'll be the dirty power that's high-cost. From the Kunstlerian emergency theory perspective, the issue is not so much electricity cost as prospective supply constraints. Fortunately, there's a fair amount of low-hanging fruit on the demand side (lighting, vampiric electronics). JHK would note that 10-20% of current demand and $4 will get me an unsustainable latte, especially to the extent that the "plan" is to add a fair amount of the energy usage of Happy Motoring onto electricity demand. Can't hurt, though.

Labels: Energy, environmentalism

by Ken Houghton

UPDATED: Jeremy spoke in class today, 14 Nov 2007

I want to reassure Jeremy (oops; make that Jeremy and Others)* that Economists don't Run Everything.

Nor, apparently, do they have exclusive rights to using the word "economic" in their papers. But, possibly to his regret, it isn't the sociologists who wrote this paper, either.

I want to see the expense reports.

(h/t Bad Science)

*Now we know why Tom is thinking of moving.

Labels: Social Psychology, Social Science

by Tom Bozzo

Readers in the Chicagoland area should run (I mean it, RUN!) to the Lyric Opera's revival of the Glyndeborne Festival's Giulio Cesare, playing through December 1. It's the fastest-moving 4-1/2 hours of Baroque opera you could see.

Some have criticized the production as being "hampered" by the enormous swings of tone associated in large part with its anachronistic Romans-in-Wellies design, but Suzanne and I agreed that the production's notorious "Bollywood" elements set in the Egyptian palace did a good job of following enormous swings of tone in the score. I will grant that the appearance of a telegraph in the background of the first scene was distracting — the clackety-clacking of the dispatches to, er, Londinium was out of sync with the music and interfered with David Daniels's warm-up. Otherwise, it was a highlight of our eight years of Lyric Opera-going.

Labels: opera

by Tom Bozzo

Brad DeLong is very unhappy with Bob Herbert. Herbert's latest column says:

Bankruptcies and homelessness are on the rise. The job market has been weak for years. The auto industry is in trouble. The cost of food, gasoline and home heating oil are soaring at a time when millions of Americans are managing to make it from one month to another solely by the grace of their credit cards. The country has been in denial for years about the economic reality facing American families. That grim reality has been masked by the flimflammery of official statistics (job growth good, inflation low) and the muscular magic of the American way of debt: mortgages on top of mortgages, pyramiding student loans and an opiatelike addiction to credit cards at rates that used to get people locked up for loan-sharking...

DeLong's verdict:

This is at most one-quarter true.

I say:

Oh no, Good Brad DeLong has been transported beyond our workaday four to twenty-six ordinary dimensions to Earth-W [*], and an Evil Doppelganger has taken his place! (Note to Brad's colleagues: be on the lookout for unexplained facial hair and/or agitation over the need to "fix" the Social Security system.)

Let's take Herbert's claims one at a time:

Bankruptcies and homelessness are on the rise.

Check. Joe Stiglitz (h/t Felix Salmon) describes a "bankruptcy boom" in the new Vanity Fair. Stiglitz notes, "Between March 2006 and March 2007 personal-bankruptcy rates soared more than 60 percent." This is despite the 2005 bankruptcy "reform" legislation. Foreclosure rates likewise are soaring. (I suspect that this is what may be meant by "homelessness;" I won't argue with Brad that the NYT's copy-editing has gone to the dogs.) Actual homelessness statistics are hard to come by [PDF], but they appear to show increases in homelessness over the last 20 years or so. It would stand to reason that inability to pay one's mortgage is at least associated with an increased hazard of loss of housing of all sorts.

The job market has been weak for years.

Check. See again Stiglitz:

A young male in his 30s today has an income, adjusted for inflation, that is 12 percent less than what his father was making 30 years ago.

The labor market's generally lagging growth is a longstanding problem, as our Angry Bear friends have documented repeatedly.

The auto industry is in trouble.

Check. It's perhaps in less trouble per headline statistics than it might be, but the part of the industry associated with domestic union jobs certainly isn't helped by its reliance on manufacturing gas-guzzling trucks. Plus, it's only a few percent of the economy, even if it's a very visible few percent. The uncomfortable truth here is that the "macroeconomy" is an analytical fiction. This economy is composed of firms and individuals that may be grouped into somewhat less-fictional sectors, some of which are in or seemingly headed towards deep recessions (housing, housing-related finance), others that appear to be there (autos), and others that are hanging in or better. For now.

The cost of food, gasoline and home heating oil are soaring at a time when millions of Americans are managing to make it from one month to another solely by the grace of their credit cards.

Check. In non-elite world, putting a grand or two of extra expenses on plastic is a step towards the bankruptcy and/or foreclosure nightmares.

The country has been in denial for years about the economic reality facing American families.

This states a conclusion that may not require a response. It does, however, seem to be shared by a sizeable chunk of the non-elite country which has been expressing deep-rooted pessimism about the future of the economy.

That grim reality has been masked by the flimflammery of official statistics (job growth good, inflation low) and the muscular magic of the American way of debt: mortgages on top of mortgages, pyramiding student loans and an opiatelike addiction to credit cards at rates that used to get people locked up for loan-sharking.

Perhaps the reading that "flimflammery" implies that the official statistics are deliberately dishonest rankles. I think what Herbert is getting at is the spin on the official statistics, where flimflammery is plentiful. It's not like Herbert is alone here.

From the Center for American Progress:

In the second quarter of 2007, household debt amounted to 131.3% of disposable income, which is only slightly below the record high of 131.4% recorded in the fourth quarter of 2006. In the second quarter of 2007, families spent 14.3% of their disposable income to service their debt, up from 13.0% in the first quarter of 2001.

And Stiglitz:

The administration crows that the economy grew—by some 16 percent—during its first six years, but the growth helped mainly people who had no need of any help, and failed to help those who need plenty. A rising tide lifted all yachts. Inequality is now widening in America, and at a rate not seen in three-quarters of a century.

And the Federal Trade Commission:

A cash advance loan secured by a personal check - such as a payday loan - is very expensive credit. Let's say you write a personal check for $115 to borrow $100 for up to 14 days. The check casher or payday lender agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend the loan for another two weeks. In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.

And Elizabeth Warren (from 2005!):

Problems not even on the horizon when this bill was written are now front and center.

• Companies in Chapter 11 that cancel pension plans and health benefits, leaving thousands of families economically devastated
• Companies that continue to pay executives and insiders tens of millions of dollars, while they demand concessions from their creditors.
• Military families targeted for payday loans at 400% interest, insurance scams, and other forms of financial chicanery.
• Scandals have rocked the so-called non-profit credit counseling industry, exposing how tens of thousands of consumers struggling desperately to pay their bills and not file for bankruptcy were cheated.
• Sub-prime mortgage companies, financed by some of the best names in American banking, have unlawfully taken millions of dollars from homeowners, then fled to the bankruptcy courts to protect their insiders and bank lenders.

As I see it, Herbert has all of these things substantially right. Moreover, Herbert has been working a substantially thankless opinion beat, covering the plight of the non-elites. Brad owes him an apology.


[*] Earth-W is a hypothetical planet with mass, geography, concentration of atmospheric gases, flora, and fauna much like our own. However, on Earth-W, George W. Bush is a brilliant military tactician, World Scrabble Champion, and moral compass to the world. Also, at the Sermon on the Mount, the hypothetical Jesus-W said:

Cursèd are the uninsured, for their poor spending decisions unfairly burden the income taxpayer. Especially cursèd are middle-class uninsured children, for they should have chosen their parents better.

Where Max Sawicky and Greg Mankiw work on Earth-W is left as an exercise for the reader.

Labels: Brad DeLong, Economics, NYT

by Ken Houghton

Chez DeLong, discussing the David Brooks piece I mentioned hopefully yesterday (which will teach me to read the whole thing), Barkley puts Arms for Hostages, propping up dictatorships, facilitating the crack epidemic, supporting Saddam, and getting Marines blown up in Lebanon into context:

Compared to this Bush's foreign policy, Reagan's was a model of decorum and international reasonableness and respect for legality.

Labels: Brad DeLong, Economics, policy wonk, Politics

by Tom Bozzo

1. Wire, Mr. Suit, Pink Flag
2. Heidi Berry, Firefly, Creation Purple Compilation
3. Sebadoh, Rebound, Bakesale
4. Manifesto, Pattern 26, Manifesto
5. Savage Republic, The Ivory Coast, Tragic Figures
6. Biff Bang Pow!, She Shivers Inside, The Girl Who Runs The Beat Hotel / Pass The Paintbrush, Honey
7. Eric Matthews, Fanfare (Reprise), It's Heavy In Here
8. Robyn Hitchcock, Brenda's Iron Sledge, Black Snake Dîamond Röle
9. The Lightning Seeds, Pure, Cloudcuckooland
10. The Pooh Sticks, Radio Ready, Formula One Generation

It's a tough week for the U.S. iTMS and eMusic, as rights-related difficulties or something puts the Esoterica Index at a solid 0.6. "Pure" was a top-20 single in the UK, and can be had from the UK iTMS, along with "Mr. Suit" on a collection of '77-'79 Wire classics. Remarkably, "Pure" is not included in a Lightning Seeds "collection" on iTMS Canada. This is where economists would tend to say, "stupid lawyers [and/or agents]," since making these items available in the U.S. would be all but gravy for someone given that they've already been processed for sale in the UK; Apple, no doubt, also has the technology to remit proceeds from U.S. sales to UK rights-holders. A legal download of a good Biff Bang Pow! greatest hits set is available for £7.99 direct from Rev-Ola Records, but it doesn't include the above track and I don't count stuff you actually have to go searching the open intertubes for.

Labels: Intellectual Property, Music, Random Ten

by Ken Houghton

Unlike her other professional organization (which is trying harder), this one fits the First Rule:

Reward Good Behavior.

Labels: Economics, labor unions, rational expectations, writing

by Ken Houghton

was the opening paragraph:

One of the more pleasant outcomes of the slowly growing trend toward highly involved fatherhood has been, I’ve found, the ability to plainly see that total ninnyishness is not a uniquely female thing.

On a day where David Brooks is interesting, if strange, the NYT reminds us that being able to write is not a requirement for their writers.

Labels: gender bias, Journamalism, NYT

by Tom Bozzo

Unproven hypothesis: Anything that could be blogged about, has been blogged about in the Fafblog, which still is relevant from beyond the blog grave.

From Saturday, Feb. 5, 2004: FAFBLOG ECONOMY WATCH: the weak dollar:

...I like the Economist because it covers a wide variety of topics and makes them easily approachable. Take this article for instance, it has a picture of a really fat man with an american dollar sign on him. This shows me that Americans are fat, and that their currency is fat, too. Thank you Economist!

"But Fafnir I want specifics," you say. "How fat is the dollar? And is a weak dollar really good?" Thats a very good question! The short answer is "I dunno." The longer answer is "I really do not know." The really long answer is "Iiiiiiiiii doooooooooooonnnn't knnnnnooooooow."

[...]

You should always try to check to see just how weak your dollars are. To do this try to always keep a euro and a yen on you at all times so you can pull them out and compare them. Take a good look. Do the euro and the yen look bigger than they did before? Are their presidents and buildings appearing to intimidate the presidents and buildings on your dollar? If so your dollar has become weaker and will probably be reluctant to buy large objects such as cars and doctors and fancy hats. Do not pressure your dollar, just let it settle for smaller stuff like bubble gum and domestic whiskey...

Truly a Priceless National Treasure. And quoting large chunks of text with a literary reference thrown in makes for very efficient blogging!!

Labels: Gibletsarianism

by Tom Bozzo

Earlier in the week, I failed to blog from two new states — maybe I can try to get all 50 into the set of states I've thought about blogging from but haven't — and might add a third next week. This is limiting my blogging time.

So is fiddling around with Facebook, where I've been studying what I've tentatively called the Facebook-Fogey Taper — e.g., there are currently 63 profiles for my college graduating class (1990), whereas the class of '05 has "over 500." However, even that thin coverage did allow me to discover the latent irony that my conservative nemesis from (undergrad) Economics of Central Planning class is now an associate professor at a small liberal arts college, whereas I'm a consultant with equity in my employer. I have also learned that some potential Facebook horrors, such as "Greg Mankiw just poked Brad DeLong," seem to be urban legends for now. Greg Mankiw isn't even Brad DeLong's friend as of this writing! However, two of my so-far three friends' own friends list do invite me to "poke Ann [Althouse]" first and foremost. Eww?!

So, if you're reading this and on Facebook, feel free to be my friend. If you are an actual friend and haven't been friended by me yet, I probably just haven't found you since I've been fending off questions from Suzanne as to what on earth I'm thinking.

Nevertheless, I've managed to hold forth on one of my favorite topics over at Total Drek.

Labels: LEGO, Meta, Total Drek

by Ken Houghton

Since I can't send anyone Erin-way today (this being a family blog, at least for Tom), Joss Wheedon Explains It All to You:

And as work? Well, in the first place, it IS fun. When it’s going well, it’s the most fun I can imagine having. (Tim Minear might dispute that.) And when it’s not going well, it’s often not going well in the company of a bunch of funny, thoughtful people. So how is that work? You got no muscles to show for it (yes, the brain is a muscle, but if you show it to people it’s usually because part of your skull has been torn off and that doesn’t impress the ladies – unless the ladies are ZOMBIES! Where did this paragraph go?) Writing is enjoyable and ephemeral. And it’s hard work.

Go Read the Whole Thing. And then go see Dan in Real Life, because Steve Carell really does remember where he came from.

Labels: labor unions, mass media, Optimal Resources, writing

by Drek

During a recent fit of productivity I happened to read an article by Stan Kaplowitz and his colleagues* dealing with opinion change. Specifically, the article reports on a series of experiments that examine the impact of two factors on subject opinions: disconfirmation and discrepancy. For those who don't have a comprehensive library of social psychological terminology filed away in their brains** disconfirmation simply means "the opinion advanced by a second individual differs from what you would expect." So, for example, if a Republican politician advanced strong support of abortion rights, equal opportunity, and environmental protection, we would experience an amount of disconfirmation. Discrepancy, on the other hand, represents the size of the difference between one's own opinion and another person's. So, if I think taxes should be raised by 2% and my Republican father believes that they should be lowered by 2%, we are experiencing discrepancy.

Part of what is interesting here is that these two factors can vary independently of one another. So, if my Republican father also said that taxes should be raised by 2% I would experience disconfirmation, since this differs from his usual stance, but not discrepancy, since our positions are identical. Likewise, if the aforementioned Republican politician expressed a distaste for abortion rights, equal opportunity, or environmental protection I might experience discrepancy, since I don't agree with his stances, but not disconfirmation, since those are the positions I anticipate he holds. The question then becomes, how do disconfirmation and discrepancy mutually influence opinion change?

Well, as it happens, they both have interesting effects. Discrepancy, it appears, tends to produce opinion change. So, if I am exposed to arguments greatly at variance with my own, the size of the variance appears to have an impact on the size of my opinion change.*** Disconfirmation, likewise, has a substantial impact- a person who takes an opinion contrary to what you would expect has a greater influence on opinion change than one whose opinions fall into line with expectations. Particularly interesting, however, is why this effect appears to occur. To quote Kaplowitz et al:

Our results show that when the source takes an unexpected position, this position need not suggest that the source is unbiased. Rather, it may suggest that the case at hand merits a comparative evaluation which is extreme enough to overcome any bias on the part of the source.

So, in other words, if my Republican father agrees that a 2% tax hike is necessary, I'm more likely to assume that this is because the severity of the economic situation warrants the change than I am to conclude that he is more impartial than I previously thought. Why is this interesting? Well, for a simple reason: it suggests that the more unexpected a position an authority takes, the more likely individuals are to assume that the authority has a good reason for taking it. It is, effectively, a social psychological explanation for what is commonly known as the big lie doctrine. Domestically we may have seen this play out following September 11th, when the populace reacted to a government that was unexpectedly trampling due process by assuming that there must be a good reason for it. The genesis of Iraq War II may well have been similarly influenced. What we see is an effective reversal of Carl Sagan's argument that extraordinary claims require extraordinary evidence. Apparently, to many people, extraordinary and unexpected claims may imply that extraordinary evidence exists, whether they have personally seen it or not.

And all of this, oddly enough, makes me think of Michael Behe and his cohort Wild Bill. They are, respectively, a biochemist and a mathematician**** and both are advocates of Intelligent Design creationism. Consider, for a moment, how their presence at the forefront of the "movement" impacts those who are exposed to them. Most people probably expect those of high education, particularly Ph.D.s and especially Ph.D.s from technical fields like biochemistry and mathematics to be proponents of evolution. It is, after all, the perspective that seems to dominate in the academy***** and academics are often expected to be atheists or atheist sympathizers. If you don't believe me about that, read Conservapedia for a week or two. Yet, suddenly, here come Mickey and Wild Bill- two academics who claim that evolution is a crock and this new "intelligent design," a transparent disguise wrapped around creationism, is the truth. Whether or not there is any discrepancy in this argument, certainly a great amount of disconfirmation results. It is obvious why, therefore, Behe and Dembski have been so popular and effective as messengers for creationism.

Yet, what happens as time goes by? The longer Behe and Dembski keep up their tirades against evolution, the more we learn about their theological commitments, the weaker that disconfirmation becomes. Eventually, we expect what they have to say and are not surprised by it in the least. It appears, strangely enough, that ideologues like Dembski and Behe have a limited period of usefulness, almost as though there is a freshness date stamped upon their rumps. "Lousy arguments best if advanced by..." or something to that effect. In order to maintain its effectiveness, Intelligent Design creationism must therefore continually introduce new scientists and academics who are equally unlikely to support intelligent design and yet do so- something that ID has been manifestly unable to do. And as this failure drags on, we might well expect what little momentum ID has acquired to peter out.

It's all quite speculative but perhaps in this basic research on opinion change what we actually have is a partial explanation for the trajectory of ID, as well as a promise for the future. The next iteration of ID will be back just as soon as they dress it up in new clothes and find another pair of unexpected hacks to advance in into the public eye.

Or, then again, maybe I'm deliberately wasting your time. Your call.


* Kaplowitz, Stan, Edward L. Fink, James Mulcrone, David Atkin, & Saleh Dabil. (1991). "Disentangling the Effects of Discrepant and Disconfirming Information." Social Psychology Quarterly. 54(3). 191-207.

** e.g. Me.

*** Other scholars are invited to correct me if more recent literature suggests otherwise.

**** As well as a sort of amateur theologian, which may explain why his understanding of statistics is so often criticized. Not that theologians can't do math, but rather that Dembski has a lot of motivation to make the math say what he wants it to say.

***** Not to mention in evidence-based institutions everywhere.

Labels: Evolution, intelligent design, Social Psychology, Social Science, Sociology

by Tom Bozzo

Not surprisingly, yesterday's Wisconsin State journal ran (A1, above fold) Ford Fessenden's NYT article listing college towns including Madison and Ithaca among the metropolitan areas least exposed to subprime lending. The theory advanced by Bruce Katz of Brookings sounds more-or-less right to me:

“Those housing markets are not superheated... And salaries are pretty good for faculty and research assistants [i.e., staff, not graduate student RAs]. So wages and housing prices are more in sync than in the rest of the country.”

Certainly, the UW and the state government provides plenty of middle-to-upper-middle class employment; Madison has relatively little in the way of old money and the super-rich. It's also an example of a limitation of the OFHEO house price indexes. Rapid sprawl has helped hold down prices in the postwar suburbia, much of which has seen little or no appreciation in the Case-Shiller sense; while some central neighborhoods boomed enough to price us out of them, older neighborhoods have gone from being priced well below replacement cost to mildly below, and remain affordable relative to the New Urbanism developments in the 'burbs.

Needless to say, the real estate-industrial complex would like to pathologize the situation. In late September, Stephen Elbow of the Capital Times (our usually progressive afternoon paper) wrote a lengthy and seemingly unironic article on the rapid growth of seven-figure housing in the area. In the hitherto unposted "Luxury Housing: The Rich Spend Drunken Sailors Under the Table," I'd written:

The article has two main lessons for the careful reader.

First, exurban McMansions are terrible investments. We're regaled with the story of investor Wayne Sweeney and his 5,700-sf house in the Town of Middleton, for which he reportedly paid $1 million nine years ago. Elbow writes:

When it was built, Sweeney's home was assessed at $880,000. Now it's assessed at the $1 million he paid for it, but on the open market it's likely to fetch more. Both the investor and the homeowner in him are pleased.

If Sweeney wants to spend a lot of money on a big house and hire Blackwater Lawn Care to fight World War V against 1.5 acres of potential weeds, then for the most part that's his funeral. [*] But as an investment, the house is not so good. A gander at the top end of the Town of Middleton listings suggests "more" might be $1.2 million or so on a good day. Subtract $72,000 in commissions and whatever Sweeney has spent to improve and maintain the place [**], and you have something like $1 million. In contrast, you could have turned the same $1 million into 1.26 million in (federal) tax-free money market investments, picked up another $250,000 (after tax) in the stock market even weathering the bust, and who knows what in alternative investments.

But wait, what about the the taxes?

And being inveterately cash-conscious, he doesn't miss the taxes he paid on his last three homes on Madison's near west side.

"The taxes here are great," he says.

In 2006 he paid just over $13,000 in taxes, and he estimates he would pay more than twice that if the same house was in Madison.

At the city mill rate, 2006 taxes on a house assessed at $1 million would have been $19,700 — more than the Middleton taxes, for sure, but far less than twice as much, unless of course the Madison location made the house worth more. It's impossible to tell from the story exactly what Sweeney's net investment is, but late-90s Madison prices were such that it's likely a mid six figure amount, which would pay the difference in city taxes forever, or nearly so.

Moreover, Sweeney bailed out of the very Madison neighborhoods that exhibited the greatest bubble-like appreciation before the run-up in prices really got underway.

As for the tendencies that keep many Madisonians less house-poor:

[Builder Hart] DeNoble says the relatively recent boom in luxury housing was overdue, stalled in part by an innate stinginess among Madisonians when it comes to housing.

Then it gets personal:

"People in Madison tend to spend not as much of their income on housing as a lot of other parts of the country," he says. "And I'm not just talking the coasts."

He reels off a string of cities -- Minneapolis, Chicago, St. Louis, Cleveland -- from which some of his past customers have moved and been stunned at the area's low housing costs.

Cleveland and St. Louis? Ouch. But is it me or does this smack of Lyle Lanley and the monorail?

"I had a customer from Cincinnati and she said, 'I can't find anything on the market that we like. There's hardly any homes in our price range,'" he says. "They wanted to spend $1 million."

Unfortunately, fewer customers seem to want to do that these days. Elbow reported that Town of Middleton residential starts have plummeted from a peak around 100 "a few years ago" to 31 in 2006 and 11 in 2007 through the September publication of the story.

Now cue the class warfare!

For such customers, the town of Middleton has become a safe haven where property values are protected from the corrosive effects of more moderately priced housing.

"I think customers are smart enough to know that if everything else in the neighborhood is $550,000 to $650,000, you don't want to put a million in your house because when it comes time for resale you're never going to get it," he says. "The neighborhood will I don't want to say drag you down, but it will."

Those darn mid-career professors, doctors, and lawyers, always ruining things for everyone else.

[*] It could be objected, and indeed I do object, that suburban development is underpriced and hence over-provided.

[**] Rules of thumb suggest a couple percent of the house price per year, which hasn't been wildly off in my experience with much less expensive houses.

Labels: Housing Bubble, Madison

by Tom Bozzo

Getting sprung from the hospital was the best birthday present of all for John.




Julia came home from preschool on Halloween wanting to be a princess. Oh, joy.




She turned 3 a couple weeks ago (here, shown with Not Mom).




"How time flies" bonus! Julia at 0:




...and John:

Labels: Kids

by Tom Bozzo

John Quiggin is perhaps a bit too fair and balanced describing how legitimate libertarians might look back on the Bush administration's dazzling successes:

This process cuts both ways. It’s hard to witness the catastrophic government failure that has characterized every aspect of this war without becoming more sympathetic to certain kinds of libertarian (and also classically conservative) arguments, particularly those focusing on the fallibility of planning. [link omitted]

If Iraq is a lesson in the fallibility of planning, then the inability of my car to transform into a flying robot is a lesson in the failure of Toyota's engineering.

Meanwhile, our friend Stephen Karlson points to a Weekly Standard article suggesting businesslike incentives (read, privatization of airport management) could cure those annoying security lines. At Fair Harvard, Irwin "Condoleezza Rice's Charm Enhances Her Power" Stelzer learned:

If lines lengthen at security check points no one has an incentive to add staff, open more lanes, or do anything to relieve the passenger's plight. By contrast, such a situation at Whole Foods, Giant, or any respectable supermarket results in the opening of more check-out lines to relieve congestion. Store managers have an incentive to prevent customers from taking their business elsewhere; airport managers don't, or think they don't. Indeed, they have every incentive to keep costs down and profits up, even if that means providing a miserable service. Imagine what life would be like in an airport in which security personnel, or at least the managers, had their pay cut every time lines lengthened beyond some target limit, and the power to correct the situation.

How soon they forget! As recently as six years ago or so, airport security screening was almost totally privatized! Lines were short, so that in my former frequent-flying life, I could show up at 0700 for an 0720 departure from Madison's (still) relatively passenger-friendly airport. The cursory screening was pretty effective at what it was meant to do, which is to say keeping random nutballs from hijacking planes to Cuba. As for the non-random nutballs, well, that was another matter.

In any event, airports actually had been pushing for increases in TSA screeners — which had been capped by act of the late Republican Congress — and/or less time-consuming screening procedures. Amazing what you can learn via Teh Google.

(reference)

Labels: Iraq, Trains Planes and Automobiles, Wingnuttia

by Ken Houghton

While Felix and Yves are rising to something resembling a defense, the Sainted Bess at dealbreaker, FT alphaville, and minyanville treat the WSJ's rehash of James E. Cayne's sins today.

The winner hands down is Minyanville, which produces enhanced graphics as well:

Labels: Naked Capitalism, PortfolioMarketMovers, The Old Firm, WSJ