economics
mikethemadbiologist | April 8, 2009I haven't ranted about the non-existent Social Security crisis for a while. Thankfully, Bob Somerby does some very good myth-busting of the 'worthlessness' of Social Security IOUs--that is, the Social Security Trust Fund:
It's true, of course, that the SS surpluses of the past twenty years (the so-called trust fund) have been borrowed and spent. (That's the system Congress put in place when it raised payroll taxes in the 1980s.) But then, the federal government borrows lots of money, from lots of sources, and all of that money has been spent! Duh. The government doesn't borrow money so…
razib | April 7, 2009A Tale of Two Depressions:
Conclusion:
To summarise: the world is currently undergoing an economic shock every bit as big as the Great Depression shock of 1929-30. Looking just at the US leads one to overlook how alarming the current situation is even in comparison with 1929-30.
The good news, of course, is that the policy response is very different. The question now is whether that policy response will work. For the answer, stay tuned for our next column.
Click through for some real scary charts.
mikethemadbiologist | April 7, 2009It's called 'feed-in tariffs.' From The Washington Monthly:
Why is the renewable energy market in Gainesville booming while it's collapsing elsewhere in the country? The answer boils down to policy. In early February, the city became the first in the nation to adopt a "feed-in tariff"--a clunky and un-descriptive name for a bold incentive to foster renewable energy. Under this system, the local power company is required to buy renewable energy from independent producers, no matter how small, at rates slightly higher than the average cost of production. This means anyone with a cluster of…
mikethemadbiologist | April 6, 2009There's increasing trouble brewing for Obama economic advisor Larry Summers. In 2008, while everyone knew he would play a big role in either Clinton's or Obama's administration, he pulled down $5.2 million from a hedge fund--for working one day a week. But you see, we have it all wrong (italics mine):
Mr. Summers, the former Treasury secretary and Harvard president who is now the chief economic adviser to President Obama, earned nearly $5.2 million in just the last of his two years at one of the world's largest funds, according to financial records released Friday by the White House.…
mikethemadbiologist | March 31, 2009There's been a lot of talk about the Newsweek article on economist Paul Krugman. But this part seems particularly relevant:
With dry humor, he once told a friend the story of attending an economic summit in Little Rock after Bill Clinton was elected president in 1992. As the friend recounted the story to NEWSWEEK, "Clinton asked Paul, 'Can we have a balanced budget and health-care reform?'--essentially, can we have it all? And Paul said, 'No, you have to be disciplined. You have to make choices.' Then Paul says to me (deadpan), 'That was the wrong answer.' Then Clinton turns to Laura Tyson…
mikethemadbiologist | March 30, 2009It's a trite saying to "follow the money", but, in the case of Senator Evan Bayh's (D-Goldman SachsIndiana) decision to oppose serious mortgage readjustments on foreclosed properties ("cramdowns"), it seems to fit. Here's the background on Bayh's opposition to cramdowns on foreclosures:
Senate debate on legislation that would allow bankruptcy judges to modify mortgage terms for troubled homeowners will be postponed until after the spring recess in April, according to a spokesman for Majority Leader Harry Reid, D-Nev...
Speaker Nancy Pelosi, D-Calif., initially was forced to pull the bill (HR…
mikethemadbiologist | March 29, 2009At this point, diversity in the Obama administration means you've never worked for Goldman Sachs. Meet the newest Obama nominee, Gary Gensler for head of the Commodity Futures Trading Commission (italics mine):
Gensler helped create this financial crisis when he was in the Treasury Department back in the Clinton era, when bipartisan cooperation with Wall Street lobbyists was all the rage. Sanders gets right to the point: "Mr. Gensler worked with Senator Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of AIG and has resulted in the…
mikethemadbiologist | March 25, 2009My thanks to the readers who noted that I accidentally used adjusted income in my calculations of the ratio of the median house price to the median wage. Below are the updated figures:
Below, on the Y-axis, is the ratio of the median house price (not adjusted for inflation; from here) to the median income (not adjusted for inflation; from here). So a value of 1.0 means that the median house costs as much as the median income, a value of 2.0 means that the median house costs twice as much as the median income:
Here are the underlying numbers; obviously, median housing price is the higher…
stoat | March 25, 2009Well, that was the Beeb headline, to The UK Treasury has failed to sell all its government bonds in an auction for the first time since 2002. But in fact It wanted to sell £1.75bn of 40-year bonds, but investors only bid for £1.63bn of the debt, the Debt Management Office said. so (a) it is hardly an obvious failure, when most of it was sold and (b) this is 40 year debt.
I wonder what it means.
purepedantry | March 25, 2009I caught this interesting sentence over at Marginal Revolution:
as consumption approaches satiation, workers reduce their hours of work to prevent themselves from actually reaching satiation. More technically, as workers approach satiation, their labor supply curves start to "bend backwards." The result is that rising labor demand stemming from rising productivity raises wages yet reduces employment.
Reminds me of relativity. Thus, one would assume that satiation, like the speed of light, is a level of consumption that a workers can never reach.
I have no idea whether this comparison is…
mikethemadbiologist | March 25, 2009Update: Thanks to the readers who caught my error. I've updated the post here.
A tale of two graphs. But before I get to them, I have to admit that this post by Amanda gave me the needed kick in the ass to write about the huge increase in housing prices relative to annual income. Amanda writes:
...above all, I'm concerned about this belief that housing prices must be maintained at the ridiculously high levels they reached during the bubble, no matter what... My feeling is that we're taking a hit on the economy any way you slice it, so why can't housing costs come down to a point where…
bioephemera | March 17, 2009I know I've typed out some howlers in my day, so I say this with all due humility. But this post over at iO9 had me rolling on the floor last night:
Paul Murtaugh, a statistician at Corvallis' Oregon State University, claims that our carbon legacy isn't just limited to our own emissions, but 50% of our children's (The other parent gets the other 50%). And 25% of their children's, and so on, and so on. He arrived at this estimate using math: Murtaugh used UN population projections, which say that after 2050, birth rates in all countries will be 1.85 children per woman, on average. Then he took…
mikethemadbiologist | March 17, 2009In the midst of all of the wailing and gnashing of teeth over the death and cooptation of business journalism inspired by John Stewart's skewering of Jim Cramer, it's important to remember one thing: that's the business model. Or to put it another way, the customer is always right.
If you ever read the biotech press, which is a subset of the larger business press, there is an obvious, inherent structural bias. The biotech press will never critique the fundamentals of the biotech industry as a whole. It will criticize individual approaches or companies. But it will almost never ask…
ddobbs | March 13, 2009From Andrew Sullivan:
I watched the Daily Show with growing shock last night. Did you expect that? I expected a jolly and ultimately congenial discussion, after some banter. What Cramer walked into was an ambush of anger. He crumbled from the beginning. From then on, with the almost cruel broadcasting of his earlier glorifying of financial high-jinks, you almost had to look away. This was, in my view, a real cultural moment. It was a storming of the Bastille. It was, as Fallows notes, journalism.
This is truly is something to see, just as Stewart's pieces on Cramer and CNBC, back to his…
mikethemadbiologist | March 11, 2009A while ago, economist Paul Krugman described the institutional loss of knowledge in the discipline of economics:
And the latter group, the equilibrium macro side, was so convinced of the logical correctness of its position that schools dominated by that view stopped teaching demand-side economics. (Schools dominated by new Keynesians, on the other hand, did teach real business cycle theory.) I haven't been able to dig up the quote, but somewhere along the line Ed Prescott declared that his students wondered who Keynes was, because he was never mentioned in their courses.
And those trained…
ddobbs | March 10, 2009"How We Decide" author Jonah Lehrer, fresh from a book tour of the UK, offers what he calls a "spluttering answer" (it's really quite lucid) to a question he says he's getting a lot these days: What decision-making errors were involved in our current financial meltdown??
The short version of his answer -- well worth reading in its entirety -- is that we (and big investment outfits particularlyl) succumbed to an abhorrence of uncertainty.
We hate not knowing, and this often leads us to neglect relevant information that might undermine the certainty of our conclusions. I think some of the…
ddobbs | March 10, 2009Back in October a study found that high testosterone levels were associated with higher levels of financial risk-taking. Now comes the blowback, as Andrew Sullivan notes:
Tina Beatie attacks testosterone:
...it is interesting to note that Pope Benedict has recently suggested that there is a close connection between original sin and the greed that has created the current economic crisis. It is also notable that the credit crunch has been created by a profession that is almost exclusively male. In the line-up of failed bankers, not a single woman's name has appeared. Male greed has proven…
ddobbs | March 10, 2009From Cratylus, an intriguing visualization of worldwide air traffic, with notes on carbon impact:
This simulation shows the world-wide air traffic over a 24-hour period. Watch as day dawns across the globe: The hubbub of activity created each morning in the skies gradually tapers off in the dead of night, only to come roiling back the following morning.
According to NATCA, the National Air Traffic Controllers Association: "On any given day, more than 87,000 flights are in the skies in the United States ... and in one year, [U.S.] controllers handle an average of 64 million takeoffs and…
mikethemadbiologist | March 6, 2009In the past, I've referred to Peter Pan Conservatives--those who think that winning wars is largely about will (and not logistics, supply, or local political conditions). Well, Treasury Secretary Geithner is now practicing Peter Pan economics:
...top officials in the Obama administration and at the Federal Reserve have convinced themselves that troubled assets, often referred to these days as "toxic waste," are really worth much more than anyone is actually willing to pay for them -- and that if these assets were properly priced, all our troubles would go away.
Thus, in a recent interview…
ddobbs | March 6, 2009Ezra Klein reviews Obama's handling of yesterday's health summit -- a piece well worth reading for a taste of how sharply focused and serious Obama is about truly comprehensive health-care reform.
Karen Tumlty, a health-care expert, describes in Time her own family's grueling wrestling match with the health-insurance industry. A timely story -- no pun intended -- as it makes painfully clear that it's not just the 46 million people uninsured (did I just say "just" 46 million people) who fare poorly in the current system.
Genetic Future looks at how a Victorian-era height-prediction system…