13 Nov 2009

Paul Krugman Solves My Family’s Financial Crunch

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I explain here. An excerpt:

…I am very surprised to confess that Krugman has convinced me of the virtues of currency debasement. As I was reading his blog post on the tragic fate of Ecuador, I applied Krugman’s lessons to my personal life, and suddenly everything became clear. In a flash, all of my household’s financial stresses were solved.

Please allow me to share Krugman’s tale — and my own personal salvation — so that you too may be freed from the bondage of creditors and scarcity.

13 Nov 2009

George W. Bush Warns Ivanka Trump of the Dangers of Nepotism

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OK I made that up to make sure you were paying attention. The real story is almost as good (HT2 Tony Garcia):


Bush warns of threats to freedom, economic growth

Former President George W. Bush, outlining plans for a new public policy institute, on Thursday said America must fight the temptation to allow the federal government to take control of the private sector, declaring that too much government intervention will squelch economic recovery and expansion.

With the Obama administration establishing far-reaching controls in the auto, real estate and financial sectors, Mr. Bush said that “the role of government is not to create wealth, but to create the conditions that allow entrepreneurs and innovators to thrive.”

“As the world recovers, we will face a temptation to replace the risk-and-reward model of the private sector with the blunt instruments of government spending and control. History shows that the greater threat to prosperity is not too little government involvement, but too much,” said Mr. Bush, who has remained largely out of the limelight since leaving office and rarely criticizes his successor.

“Trade has been one of the world’s most powerful engines of economic growth, and one of the most effective ways to lift people out of poverty. Yet a 60-year movement toward trade liberalization is under threat from creeping protectionism and isolationism,” Mr. Bush said.

Mr. Bush did not cite his successor by name, but many of his warnings seemed directed at policies Mr. Obama has embraced.

In one of his first major decisions on trade policy, Mr. Obama in September imposed a tariff on tire imports from China, making good on a campaign promise to the United Steelworkers union to “crack down” on imports that hurt American workers and industries.

Besides the obvious examples of hypocrisy, let’s not forget that even on the narrow issue of protectionism, Bush enacted steel tariffs in 2002. But they were temporary so it was all good.

12 Nov 2009

How the Fed’s Original Rules Were Relaxed to Allow It to Pay for World War I

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This is a really good article by John Paul Koning. At first I thought it was just going to be a standard “the government uses inflation to pay for wars because the public wouldn’t stand for the taxes and borrowing.” But it’s really specific. Koning goes over the safety mechanisms that were originally in place on Fed lending, and shows how they were systematically pulled back in order for the Fed to sop up the Treasury’s “war bonds” and make the world safe for democracy.

12 Nov 2009

Right-Wingers: "Gov’t Can’t Run the DMV or Health Care, But It Will Keep Us Safe From Terrorists"

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Much to my chagrin, I can remember when I was in junior high (or thereabouts) and had a heated argument with my aunt about drug legalization. She was trying to bring up compassion for the drug users etc., and I said, “What about compassion for the crack babies?!” (I was very good with indignant non sequiturs in those days, and perhaps I still am.)

One of the things that really made me rethink my views was when I learned that they couldn’t even keep drugs out of prisons. In other words, even when the government literally has people in cages and only state employees interact with them, and the “border” is truly protected, the government still can’t manage to keep people from using drugs. So if they can’t achieve their objections even in that environment, how in the world are they going to achieve a Drug Free America (TM)?

I think right-wingers who support the War On Terror (TM) and the Patriot Act–regrettable necessities but they keep us safe–should really think hard about this news story:

Army Wasn’t Told of Hasan’s Emails

The Pentagon said it was never notified by U.S. intelligence agencies that they had intercepted emails between the alleged Fort Hood shooter and an extremist imam until after last week’s bloody assaults, raising new questions about whether the government could have helped prevent the attack.

A top defense official said federal investigators didn’t tell the Pentagon they were looking into months of contacts between Maj. Nidal Malik Hasan and Anwar al-Awlaki. The imam knew three of the Sept. 11 hijackers and hailed Maj. Hasan as a “hero” after the shooting last week at Fort Hood that left 13 people dead.

“Based on what we know now, neither the United States Army nor any other organization within the Department of Defense knew of Maj. Hasan’s contacts with any Muslim extremists,” the official said.

The Pentagon comments fueled a growing dispute among various branches of the government about whether Maj. Hasan should have been more deeply investigated before he allegedly walked into a crowded soldier-readiness center at Fort Hood and opened fire.

A person familiar with the matter said a Pentagon worker on a terrorism task force overseen by the Federal Bureau of Investigation was told about the intercepted emails several months ago. But members of terror task forces aren’t allowed to share such information with their agencies, unless they get permission from the FBI, which leads the task forces.

In this case, the Pentagon worker, an employee from the Defense Criminal Investigative Service, helped make the assessment that Maj. Hasan wasn’t a threat, and the FBI’s “procedures for sharing the information were never used,” said the person familiar with the matter.

So the above suggests to me that even if we gave up enough civil liberties to transform the entire country into one big military barracks, we still couldn’t trust the government to protect us from obvious terrorist threats.

Since that’s the case, I vote that we don’t give up our civil liberties and test the theory.

Of course, what will happen is that they will “streamline agency cooperation” and implement other reforms, so that the above doesn’t happen again. Just like Fannie and Freddie and General Motors will keep revising their procedures every time they lose another few billion dollars.

“Just give us some more money and liberty, we’ll get it right eventually. We’re from the government and we’re here to help.”

12 Nov 2009

Banks’ Excess Reserves (Almost) Literally Off the Charts

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EPJ tipped me off to the fact that the excess reserves have (had?) surpassed the $1 trillion mark. In this Fed graph, it looks literally off the charts, but when you click to see the data [.txt], it lists the last data point as a measly $994.7 billion. Chump change.

For those who like statistics, the year/year percentage increase in excess reserves has come way down from its high of about 49,000% a couple months ago.

12 Nov 2009

Fort Hood Aftermath

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At first I thought they were overreacting (as is their wont), but I “get” why the AM right-wingers are going nuts over the media coverage. There was a long story on NPR this morning interviewing Muslims in the military and how they’re dealing with the stereotypes etc.

Note that I am all for that, but I can’t help think that NPR is playing favorites. After the Oklahoma City bombing, did NPR rush to interview militia members and ask if they felt uncomfortable at work, or if they felt the need to stop wearing camo for fear that prejudiced people would jump to the wrong conclusions?

Last point: The interviewed an enlisted guy (Muslim) who said, “I’m an American first, we have a job to do, I don’t view us as attacking Islam, this isn’t a religious war.”

The other statements are fine, but that first one struck me as odd: If he considers himself an American first and a Muslim second, I assume he’s not very devout, right? If a Protestant said, “I’m an American first, and a Christian second,” I would think he needs to re-read his Bible.

12 Nov 2009

Democracy Is More Important Than Avoiding Paradox

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I can’t stop reading Tyler! He knows so much, and his views are so similar to mine, and so when we disagree… Aaaaaaaa! I can’t stand it!!

While discussing a voting procedure that one of his readers had asked about, Tyler said:

The main question to get out of your head is whether or not range voting satisfies Arrow’s Impossibility Theorem. (In fact it doesn’t, most forms of range voting violate the independence of irrelevant alternatives, but don’t worry about that!). There’s no major reason why a democratic system should follow all of Arrow’s axioms as defined across universal domain, which means you have to rule out the very possibility of paradoxes. Can anyone do that? No, not even when you’re deciding which book to read next. (But should you stop reading? No.) We do, however, care if the system can:

1. Deliver decent economic growth and an acceptable level of civil liberties.

2. Build consensus and legitimacy going forward, and

3. Toss out the truly bad politicians.[Emphasis in Tyler's original.]

If you don’t know what Arrow’s Theorem is, here’s a link [.pdf] but I’ll give you the thumbnail sketch. (Note that I actually have a proof of Arrow’s Theorem that I wrote up for undergrad students in my Game Theory class, so please don’t say in the comments that I’ve misunderstood the theorem. However, I admit that my discussion of the historical context of Arrow and his mission may be apocryphal; I’m simply repeating what an NYU professor told us in class one time. I haven’t read this in a book.)

OK so Arrow wanted to inject some rigor into the analysis of different social decision problems. Basically, if you have a collection of people with different preference rankings over possible outcomes (like distribution of wealth, whether women have to wear veils, whether Tom Palmer should have blogging privileges, etc.) then how do you aggregate those diverse preference rankings into one collective Social Welfare Ordering? More casually, how do you take everyone’s unique utility function and generate a social utility function? How do you know which “state of the world” is both feasible and achieves the highest level of “social well being”?

Economists had known for some time (e.g. the work of Condorcet) that there were problems with things like majority-rule voting. In fact for any proposed system, economists had found undesirable attributes. (E.g. with majority voting you can get cycling. If you have just 3 candidates and you use a two-stage election, the order can matter.)

OK so Arrow just wanted to rule out all the stupid voting procedures–the ones plagued by cycling etc.–so economists could focus on the remaining set of sensible ones, in order to decide which they liked best, which were most consistent with liberal values of tolerance etc.

Arrow came up with a bunch of axioms that, on the surface, seem pretty innocuous and all but one of them seem perfectly sensible for a voting system we can believe in. For example, one of the axioms says that if every single individual in society thinks outcome X is better than outcome Y, then the “social welfare ordering” had darn well better agree that outcome X is better than outcome Y. The other axioms are not as simple and self-evidently desirable, but they’re pretty innocuous as I say.

But guess what? Arrow found to his surprise–and again I’m just relying on what the NYU guy said, maybe he was embellishing and Arrow actually had a hunch to guide his axiom choice–that the set of aggregating rules (“voting procedures” if you will) that satisfied his axioms was empty! In other words, if you found a voting system that satisfied 3 of the axioms, it would necessarily violate the 4th. (BTW some expositions describe it as 5 axioms, where 1 is “universal domain,” but the way I learned it universal domain–meaning we don’t put any restrictions on the type of preferences people can have–was just assumed as part of the original problem, so that’s why I think Arrow’s Theorem only uses 4 axioms.)

Now that you have that background, you will understand my middle-aged-angry-man comment to Tyler’s post:

Tyler wrote:

There’s no major reason why a democratic system should follow all of Arrow’s axioms as defined across universal domain…

I think the major reason is, “The axioms all sounded perfectly innocuous and reasonable when Arrow first dreamed them up, since his original intent was just to rule out all the self-evidently undesirable voting procedures and focus on the sensible ones.”

And then when Arrow realized he had just ruled out every possible voting procedure, people moved the goalposts.

If it were called Arrow’s Reasonability Criteria, I think social democrats would be citing it all over the place to justify their desired reforms, just like they use Pareto Optimality. But since Arrow’s axioms should have been a game ender, out the window they go.

Now as far as Tyler’s analogy with book reading: To my knowledge, no one has come up with a proof showing that very sensible rules to use in book selection will contradict each other. If I’m understanding him, Tyler seems to want me to prove, “I can avoid paradox in my rules of book selection.” But that’s not what’s going on with voting. The issue isn’t that I’m demanding someone to justify voting. No, I’m demanding that proponents of voting explain why they are ignoring Arrow’s demonstration that the rules violate quite sensible features.

Last point: This really isn’t about voting. I’d have to think about it more carefully, but I think Tyler could come back and say, “OK then champ, please explain to us why you continue to espouse the wonders of a private property order, when its ‘rules’ necessarily violate Arrow’s Theorem?”

Assuming that’s correct, then perhaps it’s close to what Tyler was saying about books. But as you know, I like to err on the side of criticizing Tyler.

11 Nov 2009

Environmental Activists Label Waxman-Markey a "Huge Mistake"

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This is actually a very nice video. (HT2 Rob Bradley) Obviously I disagree with their advocacy of a carbon tax & rebate scheme, but what they are saying makes a lot of sense if you were really worried about climate change and thought that governments sometimes did the right thing.

In contrast, I don’t see how anybody who really thinks climate change is a threat can be for the current bills in DC. If you want to know why, just watch this video, especially the middle part about offsets.