Month: December 2007

Blogging Death in LA

The LATimes has a blog, The Homicide Report, that covers murders in LA.  Here is one entry:

Timothy Johnson, 37, a black man, was shot multiple times at 939 E.
92nd Street in Watts at about 3:23 a.m. Sunday, Nov. 25, and died at
the scene. Police officers had received a "shots fired" call and found
him. He had been visiting friends in the area.

He had gone to a party that night, then had stopped on his way home
to socialize with friends outside. His shooters came by walking or
driving. He was hit multiple times. When officers arrived, he was
alone, dead on the ground, and the people who had been outside with him
had disappeared. A pit-bull puppy chained in the yard was curled on his

The comments begin as you might expect from families and friends.

… The life of an African American Man in LA has proven to be a fight
till the death. I am struggling now as I sit here looking at your
picture. All the years we spent growing up together, supporting each
other and just loving one another. I Love you!! You were my cousin by
birth but my brother at heart.

Love Kim

Posted by: Khaleelah Muhammad | November 28, 2007 at 04:50 PM

but then a darker story is revealed:

To all the people speaking glowing words about this man … im sure
some of you know and for those that dont, this man was a killer and it
was known by LAPD that he has blood on his hands. Trust me he got what
he deserved and what i prayed for. He now has to meet GOD face to face
and face the people that HE has killed

Posted by: Satisfyied Person | November 29, 2007 at 11:03 AM

Many entries excerpted in the LATimes can be found here, all of the comments (start at the bottom and work up) are here.

The sources of fuel efficiency: a counterintuitive result

Matt Yglesias writes:

Via Andrew Sullivan, Eric dePlace notes that "You save more fuel switching from a 15 to 18 mpg car than switching from a 50 to 100 mpg car." And so you do. A 15 MPG car would require 1,000 gallons of gas to drive 15,000 miles while an 18MPG car could get it done in just 833 gallons. That saves 167 gallons of gasoline. By contrast, since a 50 MPG only uses 300 gallons to go 15,000 miles, upgrading to 100 MPG can’t save that much gas — the super-efficient car uses 150 gallons.

It is tricky, because the consumption basket and number of miles driven will not stay constant across alternatives, but this logic is worth keeping in mind nonetheless.

$500 a barrel for oil?

With energy five times as expensive … we would take a
substantial hit to incomes. Our living standard would decline by about 11
percent. But we would still be fantastically rich compared to the pre-industrial
world. … Our income would still be above the current living standards in
Canada, Sweden or England. Oh, the suffering humanity! At current rates of
economic growth we would gain back the income losses from having to convert to
solar power in less than six years….

That is Greg Clark, link here.

Questions you dare not ask

Cowen’s Third Law used to read "All propositions about real interest rates are wrong," so I hesitate to tread on this ground.  The question is, when inflation comes, why doesn’t the expectation of that inflation lead to proportional increases in nominal interest rates, thus keeping the real rate constant?  The studies I’ve seen all indicate a less than one-to-one Fisher effect.  I can think of a few hypotheses:

1. People systematically underestimate the forthcoming rate of price inflation.  (Still?)

2. People have generally adaptive expectations, but they will adjust quickly and rationally to big enough jolts.  And maybe inflation rises slowly, but deflations come all of a sudden.  So it seems there are more periods when people’s expectations are lagging an inflation than a deflation, and that will produce the data pattern stated above.

3. People have generally rational expectations in a game against nature, but they are playing a game against the Fed.  The Fed is smarter than the people.  And the Fed has studied Newcomb’s Paradox so it can, on average, figure out when a dose of inflation will surprise people (in a positive way, of course, socially speaking).  So every now and then we get these surprise bursts of inflation, but no comparable surprise bursts of deflation, which of course would not help output any.  In this set-up the Fisher effect won’t fully hold.

4. A Mundell-Tobin effect is operating, so real rates of return are falling because the inflation moves people out of currency and into capital.

5. The new money enters through the loanable funds market, thereby depressing real interest rates.

6. Sometimes things just don’t work out the way you think they ought to.

Once you consider the tax system, you realize how much the cards are stacked against our attempt to explain this.  Many people can deduct their nominal interest payments from their taxes, and that implies we should see a more than one-to-one Fisher effect from inflation.  But we don’t.

You’ll also note that under most of these explanations the specified dose of inflation does not have a significantly negative effect on private savings.  If the inflation is expected, the nominal interest rate adjusts.  If the inflation is not expected, it doesn’t scare off savings.

Do you have other ideas?  I believe the incomplete Fisher effect is a result which holds both across time and across countries, but maybe you know the latest paper which I don’t.


Most of all this is a town of baked sweets, they use sugar and milk as well as in Calcutta.  Sweet milky creme thingies with walnuts, camotes, amaranth with honey, flan, fried coconut cookies, fresh potato chips with tamarind and chili and many other delights.  There is a whole book Dulceria in Puebla, they weren’t kidding.  Mole poblano almost seems like an afterthought.  The produce is also superb; I never had tasted real cucumber before today.  The city is much more beautiful than I had expected and Arabic influences are seen all over, there is even Jerusalem Tortilleria and Beyrut Tacos to add to your dining delights, not to mention the Arabic influence on the baking and of course the architecture.  I used to tell people I don’t like sweet things, but due to globalization that fiction is becoming increasing difficult to maintain.

Sartorial arbitrage

Canadian shoppers taking advantage of the parity between the U.S. and
Canadian dollars are leaving behind more than cash when the head home.

They’re leaving behind their old clothes.

Some Canadian shoppers wear their new clothes home to avoid paying a duty when they cross back into Canada [TC: do we reallly need the link behind that word?].
The old clothes get left behind in parking lots, dressing rooms and
restrooms at malls and shopping plazas in the Buffalo-Niagara Falls

At the Fashion Outlets mall just outside the city of
Niagara Falls, managers have placed collection bins near the exits
where Canadians customers can deposit their unwanted items.

Here is the story.  Thanks to Bill Griffiths for the pointer.

Mexican update

…public finances have rarely been in better shape. Thanks to policies
put in place by Ernesto Zedillo, who presided over the country during
and after the tequila crisis at the end of 1994, the budget is balanced.

2000, it was still running a budget deficit equivalent to 1.1 per cent
of gross domestic product. Net public debt, meanwhile, has fallen
consistently and is now just 23 per cent of GDP. Moreover, much of the
external debt was swapped for peso-denominated debt during Mr Fox’s

This year, net external debt accounts for roughly
7 per cent of GDP compared with 24 per cent in 1995. “It has all become
boring,” says Damian Fraser of UBS in Mexico City. “But that is fine.
We love boring.”

Even inflation, which has started to creep up
again after it dipped below that of the US for the first time in 2005,
still appears to be under control.

Consensus forecasts from the private sector suggest it will finish the year at about 3.85 per cent.

Here is much more.  But no, one correction is needed, Mexico is never a boring place:

Mexico’s country music stars are being killed at an alarming rate – 13
in the past year and a half, three already in December – in a trend
that has gone hand in hand with the surge in violence between drug
gangs here.  None of the cases have been solved. All have borne the signs of Mexican underworld executions…

Evil, ticket-gulping bots?

What high tech wonder-tools does RMG use to defeat Ticketmaster’s captchas, the annoying jumble of characters used to prove your humanity? Is it Optical Character Recognition? Something even more futuristic, maybe web 3.0-ish? Nah. Cipriano Garibay, president of RMG Technologies, boasts: "We pay guys in India $2 an hour to type the answers."

Here is the full story of why concert events must move more and more toward market-clearing prices.  Thanks to Aaron Steinberg for the pointer.

Subprime policy recommendations

Congress should simply outlaw adjustable-rate mortgages, which
basically ask borrowers to treat their home mortgages like stocks…Congress should also ban private lenders and brokers from issuing
sub-prime loans of any kind.

I am curious as to whether subprime marriages should be outlawed as well.  Starting a small business?  How about having a kid?  Of course we shouldn’t give them credit cards.  Outlawing loan sharks will be easy too.

The weakness of these policy recommendations is a sign of how lost our current understanding is.  In most policy areas, the left has a better idea than simply shutting down the market.  The reality is that we don’t know how to legislate against bubbles.  Nor is it mentioned that there’s not a clear definition of what a subprime loan is or how such a ban would be enforced in practice.  Remember the good ol’ days when Joseph Stiglitz argued that credit rationing meant that banks made too few loans to high-risk borrowers?

Here is the much longer piece, which has a good deal of content.  The economic history in the linked article is very, very wrong, no matter what your political point of view.  Imagine discussing the S&L crisis of the early 1980s without even mentioning the high inflation of the late 1970s or the resulting low levels of bank capitalization.  It’s fair enough to blame the right for relative silence on the real estate bubble — a clear case of market failure — but this article has to go in the Hall of Shame.

Why do teenagers take too many risks?

It turns out they estimate the costs of drinking and drug-taking pretty accurately, they simply see the benefits as higher than older people do.  If anything the teenagers see the risky activity as riskier than it really is.  For that reason, a focus on informing teenagers about the true risk of the activity might alleviate rather than heighten their concerns.

Obviously the teenagers are wrong in pursuing so much risk. 

There is then a breathtaking conclusion.  First, teenagers need to be taught how to recognize the "gist" of a situation, namely to go beyond explicit calculation and see it as older people do.  Second:

Dr. Reyna warned: “Younger adolescents don’t learn
from consequences as well as older adolescents do. So rather than
relying on them to make reasoned choices or to learn from the school of
hard knocks, a better approach is to supervise them.”

In other
words, young teenagers need to be protected from themselves by removing
opportunities for risk-taking – for example, by filling their time with
positive activities and protecting them from risky situations that are
likely to be tempting or that require “behavioral inhibition.”

Here is the full article.  I conclude that we still don’t know why teenagers take so many risks.


Typepad is swallowing some of your comments as spam; I’m working to liberate them.  Our apologies, the problem should be cleared up soon and even right now most comments are getting through.  The bottom line is that there are far many more comments on Ron Paul (and the federal budget) than you might have thought.  I recommend that you read them all, especially the ones critical of me.

By the way I regard Obama as the most intellectual candidate; having been a law professor is part of that.  Of course that needn’t make him the best candidate; Woodrow Wilson was an intellectual but a disaster as President.  There is no doubt that Ron Paul is very widely read and is an admirable defender of individual liberty.  I’ve also met him and I believe his IQ is high.  But if you think that he is intellectual, ask yourself what standards of evidence and procedural rationality he applied when he wrote this.  Sorry people, but I have to call ’em as I see ’em.  As I said in my previous post, I’m still happy with the idea of protest votes for Paul.

And by the way, as long as I’m courting controversy, here’s a study on how much early environment shapes the brain and IQ.

The most underrated and overrated cultural events of the year

From Prospect (UK), here is a long list, my picks were:

Hollywood movies. US ticket sales recovered this year, but to what end? This was a year for microculture, such as Facebook, Twitter and YouTube. The bigger visual productions of the year won’t much stand the test of time. On the bright side, television drama continues to rise in quality.

The iPhone. The world really did change on 29th June 2007. We now have handheld personal computers and personal entertainment centres, yet they are no larger than a thin pack of cards. And no, I’m not a techie, a gadget freak or an Apple lover. The device itself is beautiful as well.

Going meta on you again, the most frequently cited overrated event was the movie version of Atonement, then the new Philip Roth book (the latter received one pick for underrated as well).  Receiving one or more underrated picks were (I think) the new Hugh Brogan book on Tocqueville (which is excellent), the new Adam Thirlwell novel (no US edition yet), and Nicola Barker’s Darkman.

Who Benefits from the Federal Government?

A common response to my post showing that The Rich Pay for the Federal Government was that the rich also get more benefits from the federal government.  Let’s go to the numbers.  Here’s a chart showing federal spending categories for 2007.  (Click to expand.)

Social Security, the biggest category, doesn’t benefit the rich at all because net Social Security payments are heavily biased against the rich.   According to Eugene Steuerle and Adam Carasso of the liberal Urban Institute a two earner couple earning $230,000 a year (thus putting them at the mean household income for the top 20%) and scheduled to retire in 2030 will pay $227,886 more in social security taxes than they receive in benefits (in present value).

Defense is the next biggest category.  To me a lot of "defense" spending doesn’t benefit anyone but let’s be generous and say that the rich benefit from military spending in proportion to their income share which for the top 20% means 55%.  Thus $301b.

Medicare benefits the rich less than the poor since they are healthier (plus they must pay higher premiums) but let’s say that Medicare benefits the rich in proportion to their population.  If we say the top 20% are rich and assume that this is the same in the 65 and older category then 20% of Medicare goes to the rich.  $78.8b.

Medicaid doesn’t benefit the rich.  The rich do use unemployment insurance but at far lower rates than the poor.  Does welfare benefit the rich?  Not directly but maybe from the warm glow.  I don’t think the benefits of charity are what most people mean when they say that the rich benefit from the federal government but who knows.  Let’s again be generous and say that the warm glow goes just to the rich and that it is worth 20% of the benefit to the poor.  $73.4b

Everything else includes the example that people always seem to mention first, roads!  Alas, the entire transportation budget is just $77 billion, not much there even if a lot of it goes to the rich.  By my judgment a lot of "everything else" has low value but again let’s be generous and say that the rich benefit from everything else in proportion to their income share (.55).  $233b.

Excluding the national debt gives us a total of $687 billion out of $2597 billion going to the rich or 26%.  If we assume that the division of the national debt is the same as for the government as a whole (since this is just past expenditures) the percentage is still 26%.

Thus in a generous accounting the rich get 26% of the benefits of federal spending and pay 68.7% of the costs.  In percentage terms the rich get about 37 cents on the dollar.

Alternatively stated about 63 cents of every dollar in taxes paid by the rich is transferred down.  Given that the median voter is a taxeater not a taxpayer we should not be too surprised, although this is a smaller number than I would have guessed before I did the calculation.  From an efficiency point of view we should be happy that the rich don’t get too much – transferring resources creates a lot of waste but transferring resources from the rich to the rich is especially wasteful. 

The basic point is clear; In the United States, one can argue for taxing the rich on the ability to pay principle but not on the benefit principle.

Addendum: Thanks to Ted Frank for catching a math slip-up on my part which I fixed raising the total to 26%.