Tuesday, October 31, 2006

More American Cultural Imperialism

Looks like the Puerto Rican Day Parade comes to Cairo.

Monday, October 30, 2006

FT's Boffo New Chief Rubinomics Advocate

Former Treasury Secretary and ousted Harvard President Larry Summers debuts a column today on the pages of a pink, foreign newspaper. Seeing as how the editorial bent of this pink, foreign newspaper is unabashed Rubinomics, Summers is a great fit, and this article is a boffo first play from scrimmage complete with a John Kenneth Galbraith quote. Summers's mission in this column is to reiterate the oft-iterated theme that globalized capitalism is leaving people behind, people in the middle specifically. Like any Rubinomics treatise Summers's piece is written in a code whose purpose is to conceal true intentions, and yet the meaning is often crystal clear, although I am not sure as intended. Take the title, "The Global Middle Cries Out for Reassurance." Summers thinks, or pretends to think, that the global middle class is merely crying out for signs that globalization benefits them and then they'll happily go along. Maybe that's what is heard by the time the cries reach Harvard, but what the global middle is really crying out for is sinecures. They want protected status, isolated from change and Schumpeterian creative destruction. Summers could have said that the global middle cries out for participation or enfranchisement, but he didn't because they don't. The global middle class wants to keep what they got, they want a guarantee, and Summers's choice of words is ironically revealing.

So who are the middle class? Maybe it is obvious, but Summers doesn't really say. He mentions median family income in the US and average family income in Mexico (hmmm, why median in US and average in Mexico???) specifically. I don't think average Mexicans are crying out for a sign, any sign, that globalized capitalism will benefit them. Rather, it seems like they are globalizing themselves and high-tailing it across the Rio Grande.

More generally, Summers talks about "middle-income countries without natural resources struggle to define an area of comparative advantage." Really? How about the Irish, who, liberally endowed with peat bog and sheep, are now richer than their Continental brethen via pharma research, semiconductor manufacture and other brainiac commercial endeavors? Estonia? Iceland? Resource pikers, these countries have opted simply to open their doors to capital and promised not to beat capitalists over the head too much and that is it. And they are booming.

Most tellingly, Summers gives the game away by telling us who is benefiting from globalization, poor workers around the world and owners of assets - capital and labor. If the world economy were just one big factory, those reaping the gains would be the factory owners and the workers on the line. The HR department, not so much. Chief Anti-Sexual Harassment Training Officer and Executive Vice-President for the Prevention of Carpal Tunnel Syndrome? Stagnating. It is uncomfortable to hear this, but alot of Summers's middle class are bureaucrats, paper pushers who the system hires because it has to not because it needs to. In addition, alot of Summers's middle are teachers, policemen, postal carriers and government administrators. God knows society needs these people (most of them at least) but they made a choice to enter the public sector. Why is capitalism being judged by what it delivers to people who've never signed on with a capitalist institution to get in on the capitalist system? I've grown up around NYC firemen all my life and I deeply appreciate my children's teachers. These are noble callings, but nobody signs on to do that work for the ability to reap the gains of the capitalist system. If capitalism doesn't shower riches on these people, what's the problem? A business executive is simply going to make more than a cop, but that doesn't mean the exec is more important than the cop. Money isn't a good way to keep societal score. If the cop is benefiting from improvements in his life that capitalism brings (like cheaper food, or safer cars or, say, better bullet-proof vests) what is there really to lament? I can't lament standing on the platform if I never get on the train. For some, being on the platform is better, for others being on the train is better. De gustibus. Rubinomics pretends these choices don't exist and that fairness means rewards should be shared regardless of risk. It is about transfers of wealth from those who got on the capitalist train to those who made other choices. It is about taxing the private sector for the benefit of the public sector. It is about protecting Paduchans at the expense of Peruvians. Rubinomics is a political strategy, not an economic one. Insofar as Rubinomics will continue masquerading as economics, Summers is an eloquent proponent thereof.

Energy Policy Myths

A letter to the editor in Saturday's WSJ caught my eye. It was from Andrew Morriss, who I've seen quoted by Don Boudreaux over at Cafe Hayek. Morriss identifies and tackles three myths that pervade our energy policy debate. Alas, one myth he forgot to tackle, perhaps because Joseph White's original article didn't flog this particular myth, was the notion that alternative fuels like ethanol are the solution to our energy independence. Not to worry though, said myth has eminently qualified floggers enlisted in its perpetuation. No less than Bill Clinton was touting ethanol as Brazil's energy independence silver bullet (pay no attention to the giant P-50 drilling rig offshore). Don Luskin has the story and a title of pure copy-writing genius.

Giants Win With D...and Plaxico's One Arm

The thing that sunk the Giants last year was the state of their linebacking core, which had been decimated by injuries, going into the playoffs. While Ernie Accorsi made moves to ensure that such a situation doesn't hamper the G-men this year, fans should be getting nervous, although only slightly at this point. We're down to six LBs, Carlos Emmons is coming off injury and Brandon Short got dinged up this week. On the optimistic side rookie Gerris Wilkinson put in a good performance. But we'll need five of the six totally healthy going into the post-season or it's panic time again.

As I mentioned last week, the rookie D-line tandem of Barry Cofield and Mathias Kiwanuka is shaping up to be draft genius. Kiwanuka has played well filling in, but this week got the start and had six tackles including a sack (a real actual sack, not a phony graze the QB and he goes down sack). At the end of the season, if six of following seven are healthy - Strahan, Robbins, Cofield, Umenyiora, Kiwanuka, Tuck, and Joseph - it's likely to mean that the G-men will take the best d-line into the playoffs.

Defense was all the Gints needed against the Bucs, and Plaxico's highlite reel TD grab.

Friday, October 27, 2006

Pigou Club Attracting Alot of Competition

Greg Mankiw's establishment (granted jokingly established) of a "club" advocating Pigovian taxes on hydrocarbon use is generating some fun and worthwhile debate. He responds to his WSJ article's critics today. Here's another "club" maybe worth opening up.

More background here.

I only have time for some quick comments on Mankiw's response. Mankiw says this is one category of Pigou objector: "You recognize the externalities but you don’t think the government should try to respond to them. You are such a believer in small government that you are willing to live with inferior economic outcomes, such as pollution and congestion." How about, we recognize the negative externalities but we also recognize the positive externalities, mainly the contribution to our high and rising standard of living, and we think it nets out well. Also, we don't see how putting more money at the discretion of government avoids "inferior economics outcomes."

This also stuck out: "The reason I am less concerned that the extra revenue will be spent is that it already has been spent. The federal government has promised benefits to the elderly far in excess of what it can pay." Does Mankiw think that further overcommitting is not possible? If the government created Y excess liabilities at X level of fiscal capability, does he not think that expanding the fiscal capabilities of government to say 2X or 3X will result in 2Y or 3Y in excess liabilities?

The Obama Boomlet

I have to say it. I'm a little sick of all this Barack Obama fawning. (Can a white guy say such a thing in today's day and age? Probably not. Oh well, traffic is traffic, and if it has to be nuts lobbing phony cries of racism rather than interested readers, so be it.) I have nothing against Obama. The guy is probably an above average Sausage Factory Worker but in terms of a presidential candidate, he's a neophyte and probably an overrated neophyte at that, but that's not a personal fault. What I am sick of is the utter phoniness and condescension of the media. If you know media types, you know that the Obama boomlet is the product white guilt-driven, phony multicultural posturing that makes liberals feel good about themselves and superior to the rest of us. Collectively they are saying "Look at me, I'm down with black people!" all the while quite offensively paying the putative compliment that Obama is special because he is "articulate."

Nonetheless I am ready to embrace the Obama boomlet for two reasons. The first reason relates to what is now not happening as result of Obama's new stardom. What is not happening? I'll tell you. Al Sharpton is not happening. The Right Revrun' is off the screens, out of the picture, back on the outer margins of our politics where he belongs. So score a big one for Obama for taking the stage and shoving execrable characters like Sharpton off it.

Second, the Obama boomlet has set the bar lower strictly as it relates to political experience. Political experience is often a shallow substitute for actual merit and anything that lowers the premium on political experience is likely to be a good thing - it opens up the field. So in the MSM spirit of suggesting a black American with relatively little political experience as suitable material for the highest office in the land based on their potential merit and charisma, I have identified the perfect candidate for 2008. He has compiled a true record of achievement in a highly competitive field, he hangs out with Condi, and, best of all, he's quitting his day job just in time for '08. Ladies and gentlemen, the Next President?

Economic Folly and Paternalism...Two for the Price of One!

Don Luskin points out some Australian economic folly as it pertains to the local wheat crop. The craziness does not end there. Cyclone Larry wiped out almost all of the banana crop, and being a rabidly health conscious people the Aussies simply can't live without fruit, so prices for other fruits are going up. No doubt the economic poobahs down under see this as inflation which is an error, but where it really gets nutty is that Australia prohibits any and all importation of bananas. So not only could they mute the rising price level of fruits by opening up their market to foreign bananas, the governments response is a stunning display of paternalistic arrogance. There are just no bananas to be had for the next several months while plants regenerate and the Australian government is saying to its citizens, "Sorry, you just aren't allowed to have any bananas."

Wednesday, October 25, 2006

Talk About the Silly Season!

Hey, I'm all for jumping onto a feel-good bandwagon as much as the next guy, but this Rutgers football boomlet may be getting out of hand. There are media references to the "RU Nation" and fears that Coach Schiano may be lured away are prompting talk of Bob Stoops-like pay packages to keep Schiano in New Brunswick (see, even I am talking like Rutgers is some long-standing powerhouse assuming that New Brunswick is as obvious a reference as, say, Norman, Ann Arbor, or Athens). As one of the newest passengers on the bandwagon, I say hold the jellybeans and let's see how the Kinghts do against Louisville and West Virginia. Let's beat those teams and then we can talk about taking on Ohio State for the National Championship!

Mean Green Luxury Machine

The only diesel-powered passenger car available in the US for the 2007 model year, the Mercedes-Benz E320 Bluetec sedan is here. Here is a review. Interestingly, MB has chosen to charge only $1000 extra for the diesel powered version over the regular unleaded gasoline version. Doing some rough calculations, you'd be saving about $300/year on fuel costs with the diesel, so the investment would pay off in slightly over three years. By filling the tank with ULSD or a biodiesel grade like B5 as MB recommends you are cutting down on emissions too. Now all those Hollywood celebs can do their virtuous green posturing/preaching and not have to stoop down to the level of us commoners by driving a $22,000 car. If that isn't a win-win, I don't know what is.

Checking In On the Krugman Buy Signal

According to this post, Paul Krugman declared a recession watch on Aug 7, 2006. Naturally those in the know, knew to start buying stocks. Frankly, I had to wait until Stephen Roach confirmed the buy signal to be truly bullish (the week I missed was actually a down week, so the Krugman/Roach tandem would appear to be a more powerful signal than Krugman in isolation).

So how did we do? Herewith are the numbers from August 7th through October 25th (and annualized returns):

S&P 500 - +8.1% (+43.1%)
DJIA - +7.8% (+41.6%)
Russell 2000 - +10.1% (+56.1%)

Not too shabby.

HT: Paul Greenberg

Why Do We Decry Excellence?

Here is a great article that gives you a flavor of what is behind Exxon's putatively "obscene" profits. Bill O'Reilly will be dismayed to learn that it is neither rapacious gouging of consumers nor sinister influence within the US government that drives Exxon's great returns. The keys are 1) they take risks, 2) they use the best technology and 3) are just so damn good at the details. It boils down to excellence plain and simple. Excellence is and ought to be rewarded, and that is why the stock goes up and Exxon executives earn the fattest salaries. Bill should be directing his ire at guys like John Browne who yearn to be heroes to the environmental crowd while scrimping on maintanence costs that ultimately causes environmental damage and, much more seriously, employee deaths.

A Homophonic Delight

As a refreshing respite from all the news items detailing Jacques Chirac's numerous, world class whines, here is a story about Jacques Chirac's numerous, world class wines.

Tuesday, October 24, 2006

OK, America...Let's Vote!!!!!!!!!!!!!!!

OK. Here it is. I am a card-carrying member of neither political party, but I am going to put my stake in the ground right now. I'm not going to pay attention to anything more in the news between this moment and election day in order to insulate myself from distracting political tactics and meaningless developments designed to draw my attention away from the critical issues. So, in addition to my overarching philosophical desire to see more free-market, capitalist approaches to society's vexing problems rather than statist and collectivist approaches, I have identified the following specific political goals to guide my voting choices, (and I will vote as I consider it my civic duty), and they haven't changed all that much:

- Dead Terrorists
- Tax Cuts
- Zero influence of "International Law" within our Judiciary

That's it. I expect the occasional stash of unmarked benjamins in the freezer and the once-in-a-while come hither homoerotic instant message, but at the end of the day...give me what I want and you have my vote.

Dead Terrorists?

Tax Cuts?

'International Law' influencing our Judiciary?

See You At the Polls!!!!!!!!!!

Monday, October 23, 2006

Government: Kill Your Kids, Not Your Co-workers

Here's another one for the Unintended Consequences File, a smoking ban in Scotland increases sales of cigarettes, which seems to be consistent with evidence from elsewhere. And in a stunning achievement, even for European statist nannies, the smoking bans appear to be shifting health risks from a smoker's co-workers or fellow bar patrons to one's kids.

As I am not one to offer criticism without an alternative, at least most of the time, herewith is the official Now Batting for Pedro Borbon policy proscription for reducing healthcare expenses associated with smoking related disease: make people bear the financial costs of their health-affecting behavior by freeing up markets in healthcare/insurance and drastically reducing government's role in healthcare to a minimum, that of safety net for truly indigent and the uninsurable. The prospect of hefty insurance premiums solely attributable to a smoking habit or a $50,000 tab for emphysema treatment will make people quit smoking alot faster and more effectively than a government ban.

WSJ On Paulson

Readers of this blog wouldn't have had to wait until today, when this article appeared, to have insight into Secretary Paulson's role and workings at Treasury. But the article adds alot of the professional journalist tidbits that I can't provide.

My previous Paulson posts are here, here, here, here and here and here and here and here.

UPDATE: There is also this today, to which I say, "Good for Paulson." And for congressional Republicans, go out and win your damn elections yourself and stop trying to glom onto the far superior credibility of a cabinet member when it is convenient for you.

Bloomberg on New York and London as Finance Capitals

The Baseball family is back from a nice little refresher under the Caribbean sun, so there are lots of emails to attend to (I don't even own a Blackberry, and if I did I wouldn't contemplate taking it on vacation. I saw numerous losers twiddling on their Blackberries poolside while I was playing in the pool with the kids. I am pretty sure they were missing something important and I wasn't.) Anywho, I leave you with this interesting article on a theme that I have struck here many times, the competitiveness of cities like New York in a globalized world.

Monday, October 16, 2006

OK, Let's Review, Too Much Demand and Not Enough Supply...

OK, say it doing your best Dr. Phil impersonation:

"We have high energy prices because we waaant high energy prices!"

So Much for Country Club Republicans

Absolute Return magazine, a Hedge Fund Intelligence publication, tracks the political donations of the top 50 hedge fund companies. Of the $4.9 million in political donations they found, 81% percent went to Democrats and 18% went to Republicans.

Julian Simon & US Population at 300 MM

The impending arrival of the US population at 300 million is bound to prompt declinist caterwauling. Thus it is a good time to resurrect the thinking of Julian Simon, and Don at Cafe Hayek does just that prompted by a John Tierney column in the NYTimes. Tierney hits the nail on the head - overpopulation is the old, biggest, marqee, ne plus ultra of declinist arguments. All others flow from it and/or are variations of the theme. Peak Oil. Global Waming. They are at core all the same argument - that humans, by doing what humans do, are screwing up the planet. And each one is fatally constructed in that each refuses to acknowledge the other side of the ledger from the cost side.

John Edwards Clearly Doesn't Shop for His Kids

Greg Mankiw has an uncharacteristic post up highlighting Michael Barone's assessment of John Edwards's Two Americas rot.

I had to chuckle. If Dems are going to use this message they simply have to choose something credible like healthcare or gas prices to flog, nobody with children is going to buy this coat shinola. The reality is that children's clothing is one of the most remarkable deflationary stories of recent years. Children's clothing is so cheap, laughably cheap. Without consciously looking to find bargains and stretch the budget at the expense of our children, Mrs. Baseball regularly picks up attractive and durable kiddy items for less than $10, very often less than $5. I think my son's entire basic winter wardrobe of five pairs of pants, seven shirts, two sweaters, a down coat, a hat and gloves came to around $100 total. It is only if you want your kid to look like a miniature Paris Hilton or P. Diddy that it becomes expensive. Indeed, 'ole Junior Baseball's toddler-sized Tiki Barber jersey cost about as much as all of his other clothes for winter combined (which demonstrates another key economic insight, oftentimes making something cheaper means we only use more of it to use up the same aggregate level of expenditures - cheaper refrigeration means bigger fridges, better fuel economy means bigger vehicles, etc.).

I remember when George H.W. Bush came in for derision because he couldn't correctly state the price of a gallon of milk. This was semi-forgivable seeing that his kids had long since become adults. The same cannot be said of John Edwards's kids. His excuse, of course, is that he is incredibly weathy and he probably is insensitive to the price of his kids' clothing and/or not involved in the purchase of such. Not that there is anything wrong with that (in fact, I personally aspire to such out-of-touchness as a consequence of great wealth), but, as always, we should be very skeptical of class warrior rhetoric from someone who is so obviously out of touch with the everyday concerns of the rest of us.

First Giants Post of the Year!

So North Korea has the bomb. Should we be scared? Who knows. The Giants, however, have Tiki Barber. Should opposing NFL teams be scared? Up until recently the answer has been "not really." For the first three games of the season, even the Philly win, Tiki was either ineffective or just plain average. The last two games, against the hated Skins and the Falcons, however should begin to reinstill the proper level of fear for those remaining on the Gints' schedule. Against Washington, Tiki had a sub-par game for Tiki but a better than par game for the average NFL back. In yesterday's game, Tiki played at the Tiki level - 185 yeards on the ground and 40+ more catching the ball. The cascading effect of Tiki's effectiveness is amazing, i.e. Eli isn't forced into boneheaded mistakes trying to thread the needle and Brandon Jacob's legs stay fresh so he can contribute more when he does run, and Jay Feely's contributions become icing on the cake rather than must-haves.

So, we head to Dallas for a Monday night showdown with the hated Cowboys. Of course, the focus will be on T.O., which is fine, but the betting should be on T.B.

On an additional note, I don't have the data yet to make any conclusions, but anecdotally, a noteworthy story might be the D-line rookie tandem of Barry Cofield and Mathias Kiwanuka. These two are putting in good performances and making a very good line better. While it is early, Cofield and Kiwanuka could emerge as two of the best bang for the buck draft choices on the defensive side of the ball. Add Osi Umenyiora and Justin Tuck to the picture and you may conclude that Ernie Accorsi has an uncanny eye for undervalued defensive linemen.

Politics and Stocks

Over the weekend, during the neighborhood poker game, one of my neighbors expressed what I think is a common, yet strange to me at least, sentiment: how could the stock market be doing so well when a) the economy stinks, and 2) we have an uncertain, messy election coming up?

That's easy. First, the economy doesn't stink. You could be forgiven for thinking otherwise if you read the MSM papers and watch the MSM news, where the two main themes of negativism on the economy come in two forms, things that are meaningless and things which haven't happened. In the first category you have economic hobgoblins such as the trade deficit and income inequality. In the second you have a housing crash-induced consumer spending slowdown leading to recession. In reality, by nearly every account the economy is in fine shape, and the stock market knows this.

Second, the stock market is predicting Democratic gains in the House and/or Senate, which will lead to two years of the gridlockiest gridlock. That's good news for stocks. For further analysis of the economic growth/stock market outlook of the election, let's turn to Don Luskin.

Friday, October 13, 2006

Ultra Low Sulfur Diesel Is Here

Contrary to any pie in the sky "renewables" initiatives, this development is the most promising news on the cleaner energy front. ULSD is available now and it has the potential to impact a large chunk of our energy usage, not some measly .0001% of our energy consumption. Furthermore, next year when more diesel passenger vehicles, like these and this, start hitting the showrooms, the potential impact will only increase.

The auto, auto parts (engines), and oil refining industries put about $8 billion behind this effort. Technology and investment in cleaner fuels, not mandated reduction of fuel usage, is the best hope for balancing concern for the environment while not inhibiting economic growth and global standards of living.

Related: more to be optimistic about, brought to you by the evil auto industry.

A Joy and A Hope

Great, great news today in the awarding of the Nobel Peace Prize. And to think I thought they were out to lunch. Best line I've read this morning is "and, in something of a departure, it's gone to somebody who actually deserves it".

You can read more about it here. The great news here is that the Nobel Committee has recognized the premise that free enterprise and capitalism offer just as much hope, if not more, of conquering the persistent and vexing problem of extreme poverty; and, that people engaged in free enterprise towards their own betterment will be less likely fall under the sway of hateful idealogies or abide their government's militancy.

The recognition that providing capital to individuals can help them lift themselves out of poverty, something which massive amounts of aid and government programs have failed to do, is a stunning admission for an international organization. Not that government can't do its part, it has the power to do tremendous good for the poor, just not how you think. And this guy will tell you how. Here's hoping that someday the Nobel Committee will recognize him.

Now, A Club for Outsiders

I didn't start a "Nopigou Club" but I did put my stake in the ground that I was not joining the Pigou Club. It may be a semantic difference, but if I had just gone that one step further perhaps I would have gotten this type of mention.

Not that I have no affinity for Mankiw. I do and we are co-members in another club.

Thursday, October 12, 2006

Invest In Argentina?

Deadbeat Socialist and emerging authoritarian Nestor Kirchner was in New York trying to woo global investors last month. It didn't go so well.

UPDATE: Link was bad, now corrected. My apologies.

You Helped Us Live More Comfortably On Our Knees, Thank You

Another one of those dumb 'symbolic' actions by the Europeans. Again it is some silly Belgians, who are honoring Herbert Hoover for giving them food during the WWI German occupation of their country. How about honoring the folks who kicked the Germans the hell out of your country.

Wednesday, October 11, 2006

My Alma Mater Caves

They caved, but they still got some swipes at the NCAA in. Tranlation: "Fine, we'll remove the stinkin' feathers from the logo, but we still think the NCAA sucks and we've got better things to do than sue their ass."

Previous Tribe feistiness here.

Stock up on paraphernalia sporting this unconscionably offensive image while you can. They'll be useful for showing your kids what the world was like before the Ministry of Truth took over...or you can just sell them on eBay.

Tuesday, October 10, 2006

Phelps On Capitalism

I have to do a second post on this to encourage readers to read (carefully and twice) Edmund Phelps article "Dynamic Capitalism" today in the WSJ. It is an elegantly stirring endorsement of the most dynamic and open form capitalism, not just as a preferable economic system, but also as a philosophically justified way to organize society.

Phelps's, I believe, is a quite Smithian or Friedmanite view, and as Don Luskin points out, there is no mention of Keynes while there is mention of Hayek, Rand, (and I might add) Schumpeter, Marshall, and Knight. These conceptions of capitalism are unfortunately not the conceptions that often prevail everywhere capitalism ostensibly holds sway, like Europe, and Phelps tackles the essence of the problem as to why capitalism is so often reviled:

"Why, then...is capitalism so reviled in Western Continental Europe? ...it appears that the recent street protesters associate business with established wealth; in their minds, giving greater latitude to businesses would increase the privileges of old wealth. By an "entrepreneur" they appear to mean a rich owner of a bank or factory, while for Schumpeter and Knight it meant a newcomer, a parvenu who is an outsider. A tremendous confusion is created by associating "capitalism" with entrenched wealth and power. The textbook capitalism of Schumpeter and Hayek means opening up the economy to new industries, opening industries to start-up companies, and opening existing companies to new owners and new managers. It is inseparable from an adequate degree of competition."

What Phelps is saying is that when people think capitalism, they erroneously think Bill Ford not Jerry Yang, or Bill Gates circa 2002 not Bill Gates circa 1978. Sure enough, Phelps gives examples that are not indicative of this true conception of capitalism - Airbus and today's Microsoft. Also, Europeans see US-style private equity and corporate activism by hedge funds as a just a modern form of barbarism, but Phelps correctly sees the injection of new ideas, new financing, new urgency, and new accountability as a component source of the dynamism that argues favorably for capitalism.

Phelps's bottom line, beyond its core justification, is that capitalism is hardly practiced at the pure level that it could be and that it sows the seeds of its own stultification. When its dynamism grows weak, our mission should not be to dismantle the capitalist system or overlay a protective blanket around what we have, but to renew, refresh and reinvigorate the true capitalism whose essence is openness and that is inseparable from competition.

Columbia Economics - One For the Thumb

As a balance to my negative coverage of the antics up at Columbia and how such behavior is abetted by the intellectually supine Lee Bollinger, I would like to note the wonderful news that a fourth member of the Columbia University Economics faculty has won a Nobel prize in the last ten years. What is also notable and laudable is the broad idealogical spectrum (uncharacteristically broad in my opinion for an Ivy League university) that the four Columbian Nobelists represent. William Vickrey, the 1996 winner, has been dubbed a paleo-Keynesian for perhaps being "more Keynesian than Keynes himself". Robert Mundell (1999) can arguably be regarded as the father of supply-side thought, having been such a seminal influence on editorial viewpoint of Bob Bartley's WSJ Op-Ed page. In 2001 the prize went to stalwart interventionist, and Rubinomics's Economist in Chief, Joe Stiglitz. Finally in 2006, we have Edmund Phelps, who undercut the orthodoxy of the Phillips Curve (simpatico with Milton Friedman's views) and who, today in the WSJ, writes a strong defense of the vibrant sort of capitalism that we practice here in the US.

Columbia Economics can now adopt the slogan of the post 1980 Pittsburgh Steelers, "One for the Thumb." Even if the Nobel committee doesn't give out rings, it still fits.

America Just Might Avoid Economic Catastrophe

Monday, October 09, 2006

Retreat from Capital Markets Continues

Kinder-Morgan, HCA, numerous small companies that you've never heard of, and now Cablevision. The list of companies that have decided to abandon the public capital markets, because of the high cost and onerous regulations are not worth the benefits of a public listing, is growing.

More On Paulson

My original post on Paulson's appointment as Treasury Secreatary is proving dead on the money. This Bloomberg article today adds Sarbanes-Oxley reform to the list of initiatives that Paulson is putting his considerable credibility heft behind. So, on top of getting Schumer and Graham to retreat on protectionist tariffs against China, seeking to curb frivolous lawsuits, and talking down hedge fund regulation we can now add the poster child for onerous and needless regulations, Sarbanes-Oxley, to the list of bad ideas that Paulson is combatting. (Bloomberg trots out ultra-liberal Columbia Law professor and former SEC Commissioner Harvey Goldschmid to decry Paulson's efforts. Here's an encounter I had with Goldschmid. It's clear that Goldschmid has never met regulation he didn't like. Given his reputation among Columbia Law grads as an arrogant jerk, it stands to reason that he feels all-knowing people such as himself can guide and protect our capital markets through wise stewardship.)

Still, Paulson has his work cut out for him. President Bush's ratings slide and the miserable leadership of the GOP Sausage Factory majoritarians are a prime source of momentum for the lousy and economically damaging ideas that spring from the left like dandelions when there is political blood in the water. One of the very first things that a Republican (or Unity ticket or Democratis ticket for that matter) candidate for the presidency in '08 ought to do is to seek the continued services of Treasury Secretary Paulson for the nation.

Airbus Keeps Digging

Here is an article on the turmoil and latest developments at Airbus. The article paints Streiff as the reformer and EADS-allied Gallois as the status quo. Quote:

"But since then, Mr. Streiff has told EADS managers that he wants greater autonomy in implementing the overhaul -- including pushing ahead with factory closures and layoffs if necessary. Mr. Streiff, with backing from EADS, on Oct. 3 pledged to break "taboos" at Airbus, even throwing open the question of whether Airbus's longtime distribution of work in Europe is the most efficient way of running the business. Splitting work evenly between France and Germany has been a basic rule at Airbus since its creation in 1970."

Also interesting is that de Villepin thinks things ought to be simplified. My guess is that he only wants things simplied to the benefit of France, not to Airbus. If this is an accurate depiction, it appears as if EADS has chosen not to stop digging.

Friday, October 06, 2006

Bollinger In Deeper Yogurt Than He Thinks

Columbia University has managed to find itself in yet another fire storm and Lee Bollinger's ineptitude is on full display yet again. This time I don't think he is going to wiggle out of a media feeding frenzy as he has in the past. Just a few weeks ago he was forced into making the all-too-common University Presidential Affirmation that 'yes we really do support free speech and open dialogue' yadayada. Here are some excerpts from Bollinger's public statement regarding the school's invitation of Iran's President Ahmadinejad to speak:

"Let me also repeat from my earlier statement today my core belief that the example of freedom we set here in the United States , and especially at American universities...most Iranian students would dearly love the kind of freedom American students have..."

"Freedom to speak, pursue ideas, and even to hear and evaluate viewpoints totally objectionable to our own is central to America ’s greatness. It is also an essential value of our universities and, indeed, of our civil society. We are not afraid of words from the likes of President Ahmadinejad." ([edit.] but apparently we are afraid of the words of Jim Gilchrist)

Little did Bollinger know that in such a short time he would actually have to seem to be living up to these words. Egad. Now he has got Bill O'Reiily asking alumni to withhold donations just as he's launched a $4 billion fund-raising campaign (more here). Not that your typical Columbia grad turns on every word that Bill O'Reilly says, but this is more damaging than you think. The real money that flows into Columbia comes from elderly successful men who attended Columbia in the 1940s and 50s and who are now departing the scene. These men are usually up from nothing New Yorkers who credit their Columbia education/experience for their success in life and have a fond memories of the university as it was during that time. Any suggestion to this generation of men that Columbia is not what it used to be (and it decidedly is not) in terms of institutional principles will be damaging. Scenes of spoiled brat twenty year-olds running amok and acting like bullies will make your typical big money Columbia alumnus cringe. Rich Jewish Columbia alums have already lost faith in general due to the university's love affair with radical Palestinianism. Will Bollinger now preside over the disillusionment of that core group of successful alumni from the 40s and 50s with his solicitude the of the mindless, immature radicals running herd in Morningside Heights? I think he will. We'll see.

More Prosperity Found in the Economy's Seat Cushions

It's official. All of those pundits and even professional economists who used the payroll employment survey to make the claim of a "jobless recovery" and then use that to criticize the 2003 tax cuts, were wrong. Wrong. Plain and simple. These tax cut critics steadfastly refused to give any weight to the household survey despite its consistently raising red flags about accuracy of the payroll data. They clung fervently to the payroll data and the payroll data alone and screamed from the highest hilltops "JOBLESS RECOVERY!!!!" It became a political mantra, an accepted media talking point, even a popular mythology (in my daily life I've encountered numerous people who couldn't even accurately state the unemployment rate talk about a jobless recovery). And it was all wrong.

You might be inclined to shrug it off and say "good enough for government work," but these data are so influential. So much that affects us turns on these numbers. It is infuriating that they are so wrong so often.

More here.

Thursday, October 05, 2006

Libertarian Democrats, Unicorns and Other Mythical Creatures

Libertarian economist Arnold Kling calls liberals' bluff and exposes the recruitment of libertarian minded folks over to the Dems's side for this election as the naked cynical ploy as it is. In reading Kling's proposal and thinking about the numerous offers that could substitute for Kling's pick of school choice, I'm not sure that liberals and Democrats quite understand libertarianism at all really. They seem to think they can lure libertarians with their pro-choice, pro-gay marriage, anti-Patriot Act bona fides. Fine, but what about gun control, school choice, high taxes in general, targeted nanny taxes (like Nick Kristof's Coca-Cola tax), social security reform, and health savings accounts? Don't they know that libertarians hate it, love it, hate 'em, really hate 'em, want it, and really want it? So it would seem that there isn't a compelling case for libertarians to vote for Democrats apart from Republican buffoonery. There has to be more to it. So to find out what the 'more to it' is, I went to Kos's expanation of it all. I tried to make sense of it, but that is impossible. Kos's argument is so incredibly daft, if this guy is the intellectual guru of the netroots, we have nothing to fear from them. His basic argument seems to be that big business is now more powerful than government and since libertarians hate big government, we should hate big business more. And what is the cure for big business? Well, government naturally. What is particularly striking is that in the one exmaple Kos points to, the awful spectacle of a dominant Microsoft, big business didn't prove all-powerful after all. Microsoft faded as a tech overlord as entrepreneurs gave us new, more, and better options. The government actually tried and failed to tackle Microsoft, it was free market competition that did the trick. So there is contradiction number one. Contradiction number two comes when Kos attributes the techno-utopian environment that squelched the evil Microsoft to government - education specifically. This is a joke. I can guarantee that Silicon Valley would not exist today if 40 years ago, California walled off its borders and had to make due solely with the folks that came out of its education system. Silicon Valley is what it is because it attracts the best from around the world and is brutally competitive. Kos explicitly makes this judgment when he talks of the techno-utopia being made up of Indians, Chinese and drop-outs. So how is the ascendence of people who grew up outside of the government-run US education system a tribute to the government-run US education system? The argument is terrible. But let's get back to the basic premise that business is more powerful than government. Does GM track you down and threaten you when you buy a Toyota? Does government try to do better to win your approval when you pay only part of your taxes or pay them not at all? What about remodeling your home without a permit or opting to forgo auto insurance because you feel like it? Does Exxon tell you can't build on your land beacuse there is a puddle on it and it is now deemed "wetlands" or because a rare bird migrated through? Does GE make you fork over dough to protect the profits of sugar beet farmers? The basic premise is garbage. Government is still more powerful and more deserving of our checks and reins.

The rest of the case for the Libertarian Democrat is equally poor. It amounts to a bunch of adolescent platitudes about corporations fouling our environment and plundering our treasury and making our lives miserable, all uncritically put forth as received wisdom. About the only thing Kos gets right is that Republicans have failed libertarians, but he fails to show any alignment between libertarians and the Democratic Party based on principles. He points to actual Democrats running in races across the country, who are seemingly libertarian and who are benefitting from Republican failure, but are there any even mildly libertarian figures fighting the fight within the Democratic Party's establishment? He doesn't point to any because there are none. At least the Republicans have a Ron Paul, Jeff Flake, and Tom Coburn, measly contingent that it is, fighting within their party for things that appeal to libertarians. If the Republicans embrace members like these guys more and the Democrats continue to embrace Pelosi, Boxer, Feingold, Reid, Kerry and Hillary "we are going to take things from you" Clinton, the fight for the libertarian vote will be a rout.

More SuperHank

Back in July, a federal court smacked down the SEC's ham-handed attempt to regulate hedge funds. The legal reasoning of the verdict was apparently so unassailable that the SEC turned tail and chose not to appeal. The momentum for regulation has now shifted to the Great Sausage Factory, where the pro-regulatory SEC has thrown the issue. Naturally, Congress is itching to regulate (or if you are super cynical, itching to threaten to regulate hedge funds but would be happy to lose enthusiasm if campaign contributions just happen to be made...) and the Amaranth blowup provides momentum to the forces advocating regulation. But Donny Baseball has it on good authority that Treasury Secretary Paulson is working to get cooler heads to prevail, just as he did by quieting Sens. Schumer and Graham's tariff mania. (Not that hedge fund regulation is on a par with protectionist tariffs in terms of its potential damage to the economy, it isn't even close. Still though, hedge funds are a source of efficiency in our capital markets, and why attack a source of efficiency for no good reason?)

There isn't compelling evidence that Amaranth's woes reveal systematic risk, and I'm sure that is what Paulson is telling the itchy Senators and House Representatives that inquire of his opinion. In fact the prevalence of third parties willing to swoop in and assume Amaranth's busted trades would argue that the proliferation of hedge funds and other alternative investment vehicles can be viewed as a positive. The expanded and increasingly diversified range of asset class and risk/reward profiles represented by thousands of new hedge funds exploiting ever finer niches means deeper and broader liquidity across the capital markets. This is not to say that there are no risks posed by irresponsible hedge funds, but like any other industry the responsible players far outnumber the irresponsible players and over time the irresponsible players tend to get washed out. You can't regulate away the risk of doing business with scummy, greedy and/or stupid people.

So, not as big or as visible a victory as the Schumer/Graham thing, but this is further evidence that Paulson is doing laudable legwork in DC keeping bad ideas from gaining traction. We are lucky to have him, cause man are we gonna need him if we have to face the horror of the dreaded seven words.

Argh, I Can't Resist

Dammit, as much as I want to keep the subject matter and tone of this blog elevated....

Omar Abdel-Rahman says, "Screw that, I'm already blind."

Foley Attempts a McGreevey

Former Congressman Mark Foley's representative capped off a brief statement with this, "Mark Foley wants you to know that he is a gay man." (As if you couldn't figure that out.)

This transparently lame attempt to garner some victimology points (i.e. "give me a pass because I identify myself with the politically correct nobility of a putatively persecuted minority group.") rings, um, a bit hollow but you can't blame him for trying.

Former New Jersey Governor Jim McGreevey not only attempted this ruse but, by most accounts, got away with it. With charges of corruption mounting against his administration (beyond the acceptable threshold of normal Jersey-style corruption), only part of which was a clearly nepotistic appointment to a high-profile government job, McGreevey announces that he is a "Gay American." Well, indeed he is a Gay American. But he is also a Horribly Corrupt Politician American. And a Guy Who Humps Strangers at Truckstops American.

All told, McGreevey's gambit worked, the damage was pretty limited and the Dems suffered not one iota in the Garden state. So why wouldn't Foley attempt to imitate this strategy? It is clearly the rational thing to do. Except that it doesn't work for Republicans. Mark Foley may want you to know that he is a Gay Man, but the media want you to know that he is a Sick Pederast Abusing His Position Man (which he is).

Geez, this whole thing is enough to give you the impression that it is not our best and brightest that are going into politics.

$4 Billion Looking Farther and Farther Away

Man, this stuff writes itself. Last week I posted about how Lee Bollinger, Columbia University's President, is trying to raise $4 billion and yet the busy bees that inhabit his silly hive of jejune radicalism seem to be thwarting him, albeit indirectly, with their antics. Here is the latest. In the absence of the fundraising campaign I honestly doubt Bollinger would make even a watered down defense of Gilchrist's free speech, but I suppose that since Bollinger is now seriously looking for money, he'll make a statement endorsing everyone's right to have their viewpoint heard. But he won't do anything about it, he won't make Columbia a place where opposing viewpoints are possible let alone accepted. Bollinger is as much a prisoner to the radical faculty and university community as Larry Summers was and you can bet that Bollinger isn't going to place his head anywhere near the chopping block after seeing what happened to Summers.

Tuesday, October 03, 2006

Airbus A380 Woes Deepen

A third shoe has dropped. Airbus's A380 customers must now be wondering if the fourth shoe is going to drop.

UPDATE: We're approaching DEFCON 2 on the corporate disaster early warning system. This is likely the worst that could happen. Need I state the obvious...if you fail to sell a plane to a customer today, you'll be waiting 15 years before you can try again. I'm no airline industry guru, but I'd venture to say that if Boeing can pick off, say, 50 orders in each of the next two years for what would have been A380s, the A380 program will be go down as one of the most disastrous corporate projects of all time (and thus one of the largest government bailouts).

Note Correction: Sorry if I created confusion by originally saying we were approaching DEFCON 5. I thought 1 was normal and 5 was deep yogurt, but it is the other way around.

Monday, October 02, 2006

No Freedom to Be Fat?

John Fund, not outlandishly, sees an Orwellian danger at the intersection of nationalized healthcare and nanny-state impulses like NYC's proposed trans-fat ban. From Saturday's Journal Editiorial Report:

Fund: Well, New York City's Health Department, the food bullies, are going to tell every restaurant in the city, you can no longer use trans-fats, which is a way of cooking a lot of food. Now, over half of New York restaurants don't use it already. But they're going to take away the consumer choice and say no more flaky pastries, no more crunchy french fries. Chicago is about to do the same. I simply say this is what's going to happen if we ever have national health care. We are going to see a lot of behavioral modification because it's the only way the government is going to be able to cut down on health-care costs. This is the first step.

Gigot: So when the government pays for health care, it's only a matter of time before government starts telling you how to live and how to eat?

Fund: No health care unless you lose that weight.

Donny Baseball on 2/24/06: "Maybe freedom means being able to be a fat, artery-clogged slob who gets winded climbing stairs if one so chooses."

The economic arguments against state-run healthcare have primacy, but this libertarian concern will likely become more prominent.

Asinine Notion Will Not Go Away

The idiocy that healthcare should be a human right continues to infect thinking and thus our policy debates. So, I have to go back to the archives to reprise an oldie but a goodie (that I am sure will attract the ire of those who got their triple bypasses for $500 and thinks we all, or at least most of us, so be so treated). So let's go back and review some fundamentals.

The Most Assinine Platitude in America Today

And there are all alot of them, but here it is:"People have a right to affordable healthcare."Let's examine. What exactly is "healthcare"? I will start with the simplest input. It is the knowledge and experience of healthcare professionals - doctors, nurses, EMT technicians, etc. Where does this knowledge come from? Schooling. Lots of very expensive schooling. Granted medical school students are readily financed, but the ultimate financial obligation rests with them, they have invested in ("bought") the intellectual capital of a medical education. It also comes from rigorous on the job training. Internships are brutally intense and pay very little, so again there is a big personal investment in the hands-on training required to provide "healthcare." Then there are intangible, yet important, aspects of "healthcare" like a doctor's bedside manner, for lack of a better term. This is essentially a doctor's interpersonal skills, communication ability and so on, all things that are valuable and obtainable at cost as well (granted, to some it comes naturally, but mostly this too is acquired at a real cost). All of this is bought and paid for, it someone's property. Why do I have a right to any of this? Do I have a right to the benefits of an electrical engineer's training, in the form of subsidized consumer electronics, at below market value? How about a lawyer's advice or financial planner's expertise? No, I have to pay the going rate for these things. Why is a doctor's bought-and-sweated-for knowledge and experience mine to have by rights at anything less than the going rate?

You can extend the analysis to medical equipment - ultrasound imagers, MRIs, blood analyzers, etc. Someone invents these things and someone has to build them, from raw materials, in a factory where workers are paid and electrical bills are incurred, etc. Do I have a special right to the use of such equipment at a special rate that is deemed to be "affordable" yet may not cover the input resources?

Hospitals too. A building of steel and concrete, built on somebody's land, by a construction crew...you get the point.

How did we ever get to the point where we feel that the real cost of all of these inputs (education, land, labor, invention) must be ignored? We blithely bandy about the word "healthcare" with all of its connotations of life and the individual and we think nothing of advocating stealing what is somebody else's property, which is exactly what we do when we invoke the need for "healthcare" at anything less than the full market value of all that it takes to provide it?

And this is not to even contemplate the variations in quality of "healthcare." What should be affordable? A John Hopkins-educated doctor? A Central State-educated doctor? A 2006 model MRI or a 2002 model? But that is another post.So there it is, in all its idiotic glory, the dumbest platitude in policy discussions today. Say it with gusto and look completely foolish.