Month: March 2009

Words of wisdom

From Matt Yglesias:

The question here is what would Adam Posen have done if he had Tim
Geithner’s job? And based on Posen’s analysis, I think the only
conclusion you can reach is that he’d have done more-or-less the same
thing. Talking about a different issue last week, I heard Tyler Cowen
forcefully make the point that you have to think of the political
constraints as a real policy consideration. Suppose Geithner had asked Congress to appropriate $1 trillion to implement a program of bank
nationalization, asset writedowns, and loan guarantees–what would that
have accomplished? It certainly wouldn’t have gotten Congress to
appropriate $1 trillion to implement a program of bank nationalization,
asset writedowns, and loan guarantees. It might have derailed the
budget and thrown the political momentum on the Hill to proponents of a
neo-Hooverite spending freeze program. It might have caused panic. And
it certainly would have undermined the credibility of the inevitable
effort by Geithner to do the most he can with the authority he already

One thing I like about Bryan Caplan's book is an interpretation which he will probably hate.  The truly decisive actors are people directly in the political process.  Maybe the "libertarians" who are or have been in politics are not just "sell outs."  Rather they are implementing the net-liberty-enhancing policies that a real libertarian would favor if he or she were truly a decisive agent.

Which new mothers are most likely to abandon their old jobs?

Jane Leber Herr tells us:

Looking at these women 15 years after graduation, when they are approximately 37 years old, we find the same pattern seen elsewhere; among mothers with a graduate degree, MDs are the most likely to be working (94%), and MBAs are the least likely (72%)…Among PhDs, 86% are working, among lawyers (JDs), 79%, among women with non-MBA masters, 74%, and among those with no graduate degree, 69%.

These basic differences across professions seem to hold up once other measurable factors are controlled for.  Most of the short essay focuses on causality; the family-friendliness of the job environment may be one important factor.

The Genial Gene

That's the new book by Joan Roughgarden and the subtitle is Deconstructing Darwinian Selfishness.  I'm not sure how true this book is, but if you're looking for a new popular book on evolutionary biology which is engaging, this is the first one in some time.

The book rejects the "Red Queen" hypothesis for why there is sex (e.g., outracing parasites by frequently rolling the genetic dice) and presents a "portfolio diversification" view:

The explanation for why asexual species keep popping up and quickly dying compared with sexual species would seem to be completely explained by thinking of asexual species as genetic versions of get-rich-schemes and of sexual populations as genetic versions of long-term mutual funds, without any need to invoke cost-of-meiosis considerations.

In other words, sex brings a genetic diversity which protects against rapidly changing environmental conditions and thus favors parental genes.

The author also argues against signaling theories of the peacock's tail and against sexual selection more generally (especially on that latter topic I was not convinced but the discussion of sexual dimorphism and why it doesn't always hold is nonetheless interesting).  She presents "social selection" as an alternative and if you turn to pp.237-8 you will see an excellent page-and-a-half summary of what the book is about.  Male promiscuity, for instance, is viewed as a genetic "tactic of last resort."

Recommended, but with caution.  It is a must for anyone who reads about evolutionary biology and by the end of the book I was less skeptical than when I started it.

Here is a summary of Roughgarden's previous book.

Spanish bank shares plunge

Have you seen that Spanish banking is in trouble?  Less than one year ago this country was touted as a model of banking regulation, in part because it did not allow full securitization of bank assets.

One lesson is that securitization is not necessarily the villain it has been made out to be.

Second, Spanish unemployment is already over fifteen percent (and rising) and this was the case even before Spanish banks started reporting their recent troubles.  There is so much talk about how banks amplify risk but don't toss out the classical model altogether.  Banks also share in risk.  If your banks are less risky, often something else is more risky, and vice versa.  Today many countries are learning this lesson.

Choose a theory

Theory 1: President Obama replaced Wagoner with Fritz Henderson as CEO of General Motors because he is convinced that Henderson will be a better corporate leader.

Theory 2: President Obama replaced Wagoner with Fritz Henderson as CEO because the A.I.G. public relations debacle taught him not to appear "soft" with corporate leaders receiving government money.

Which theory do you vote for?  Which principles do you think should be governing the disposition of leadership in major U.S. corporations?

The People’s Pottage

I don't much blog the auto industry because it is so depressing. But this passage, from Francis Cianfrocca, today caught my eye:

Today, the President of the United States is expected to make
significant announcements about GM’s warranty policy. No, that’s not a
typo, and yes, it’s remarkable. I didn’t say the President of General
Motors, I said of the United States.

This bit was interesting too:

Many of GM’s dealers will receive lavish buyouts as an inducement to
close their doors, for a total cost in the billions of dollars. That’s
disgusting, but it’s required both by GM’s contracts with them and by
the welter of state laws that protect the dealers. (If you want to know
who the political power brokers are in any given city or town, look for
the car dealers.)

This is going to be kept scrupulously out of the news, because car
dealers contribute huge sums to every last man and woman in Congress
and the Senate. The public was ready to torch the private residences of
AIG executives, but they won’t make a peep about paying billions of
their own hard-earned dollars to provide a cushy retirement for
thousands of already-rich auto dealers.

The post is interesting throughout.

Assorted links

1. Discussion of money illusion in economics journals: a graph (over time) and discussion.

2. The crisis: who wrote the software?

3. Top young economists?  I can think of a few who are missing…but here is the working papers page for the ranked #1, Marc Melitz.  The world has some funny disconnects when he doesn't have his own Wikipedia page (TC: he has one now!  Try doing the rest of the list.).

4. Expected vs. unexpected uncertainty.

5. How European newspapers are making do.

6. Profile of Ezekiel Emanuel, new health care advisor to the Obama administration.

Would Idaho have more people if it were a separate country?

Call me silly but I think about questions like this.  It's a big state with only about 1.5 million people, even though it is the only place with six pointed star garnets (refined here).  Much of the state is beautiful.

Imagine the counterfactual that, in 1846, when the U.S. and Great Britain resolved the border, one part of the area went its own way.  Today an independent Idaho would probably a) be more "right wing" than the U.S. as a whole, and b) free ride upon U.S.-provided public goods, such as national defense.  A federal Idaho government might be more concerned with boosting tax revenues (it would be full residual claimant) than is the current state-level government.  All those factors would militate in favor of population increase.  Most of all, I have the odd (Bayesian?) notion that since it would look and feel like an underpopulated country, more people would flow in.

On the other hand Idaho would face the risk of trade barriers and its legal order might be less secure than for the U.S. as a whole.  The prospect of mobility barriers could either keep people in the area or out of it.

Would the place still be called "Idaho"?  I doubt it.  Might the town of Nampa — #2 in the state — be much better known to the world at large?  I think so.

Does EU accession add or drain people from its smaller units, such as Slovakia and Estonia?  There's much at stake here, yet governments sign on to many agreements without thinking about the long-term consequences for their populations, whether pro or con.

Note: The comments section on this post is not for rehashing standard debates over immigration.

One way to encourage births (in small countries)

Or is it just intertemporal substitution?:

Two years after having one of the lowest birth rates in the
world, Georgia [the country] is enjoying something of a baby boom, following an
intervention from the country's most senior cleric.

the end of 2007, in a move to reverse the Caucasian country's dwindling
birth figures, the head of the Georgian Orthodox Church, Patriarch Ilia
II, came up with an incentive. He promised to personally baptise any
baby born to parents of more than two children.

There was only one catch: the baby had to be born after the initiative was launched.

The results are, in the words of the Georgian Orthodox Church, "a miracle".

…The country's birth rate increased by nearly 20% during 2008 – a rate four times faster than the previous year.

Many parents say they took the decision to have another child on the basis of the Patriarch's incentive.

Here is the full article and I thank John Chilton for the pointer.

Managing the Fed’s new balance sheet

James Hamilton writes:

I recommend instead that the Fed should be buying Treasury Inflation-Protected Securities in the current situation. Tim Iacono
says that’s like the Mafia buying “protection” from itself. But my
point is that TIPS represent an asset that would gain in value at a
time the Fed needs to sell them, meaning that the logistical ability of
the Fed to drain reserves quickly in such circumstances is without

Read his whole post, which ranges more broadly than this quotation would indicate.  It’s one of the best blog posts written this year.  Don’t forget this crystal clear passage:

A second concern I have with the new Fed balance sheet is that it has
seriously compromised the independence of the central bank. To my
knowledge, every hyperinflation in history has had two key ingredients:
(1) budget deficits that could not be resolved politically, and (2) a
central bank that assumed the obligations that the fiscal authority
could not.

I certainly would not predict hyperinflation, but we could be in for some serious contractionary monetary policy in the next five years.

Markets in everything

$379.00.  I thank Peter for the pointer.

Elsewhere, here is Al Roth, on "Giving anonymously, for a fee":

How to give money to a friend anonymously (and be sure that it is received)? Try Giving Anonymously,
established "to facilitate giving in such a way that "money" does not
hinder friendship." They will send along your gift via their own check,
and send you a copy of the cancelled check.

Is there a big gain to keeping banks small?

I agree with Kevin Drum:

But to me it still has the flavor of a solution that's clear,
simple, and wrong.  After all, Bear Stearns was a quarter the size of
Citigroup, and it was considered too big to fail.  So just what would
the limit be on bank size?  $500 billion in assets?  $200 billion? Can
a country the size of the United States even have nationwide banks with
limits like that?  And what happens the next time around, when all
these smallish banks overleverage themselves and collapse en masse? 
Are we any better off than we are with a few big banks failing?

The whole post is worth reading, but I have a feeling that nostalgia
for the 70s just isn't going to work.  Big companies are here to stay,
and I suspect that any regulation stringent enough to keep banks small
enough to fail won't be sustainable.  And unless we reign in
overleverage and massive waves of credit expansion, it won't do any
good anyway.  The same thing will happen again, just in a slightly
different way.

Here is my earlier post on itty bitty banks.

What I’ve been Reading

1. Gail Hareven, The Confessions of Noa Weber.  This newly translated Israeli novel was a great deal of fun, without being too light.  Recommended.

2. 1,000 Recordings to Hear Before You Die, by Tom Moon.  It's mostly popular music but a mix of everything.  I was amazed how much this guy's taste, including on particular classical recordings, matched my own.  This is a more serious book than the packaging indicates.

3. Miles, Ornette, Cecil, by Howard Mandel.  I never considered putting this one down.  It appeals to readers who are already fans but it is also a good start for expanding your horizons beyond "traditional" jazz.

4. Jason Scott Smith, Building New Deal Liberalism, The Political Economy of Public Works, 1933-1956.  A very good book arguing the case for New Deal public works projects, primarily on grounds of growth (not stimulus).  I also enjoyed Robert D. Leighninger's Long-Range Public Investment: The Forgotten Legacy of the New Deal.

5. Keith Thomas, The Ends of Life: Roads to Fulfillment in Early Modern England.  His Religion and the Decline of Magic is one of my favorite history books ever (he tells us that, in equilibrium, a certain number of people should pretend to be witches, to get what they want).  The new one is impeccably researched and written, but I don't see so much original material there.  I can honestly call it a good book but for me it was a disappointment.