Month: February 2010

The new cabinet in Chile

E. Barandiaran notes in the comments:

You may want to know about the qualification of the new cabinet of 22 secretaries. There are 6 economists with graduate studies in the best US universities: Felipe Larraín will the secretary of the Treasury (Felipe is well known as the co-author with J. Sachs of a macro textbook and also got his Ph.D. from Harvard), two a Ph.D. from Minnesota and three a Master from Chicago. There is only one laywer but with training in law and econ in Harvard. A few others have degrees in public policy or MBA, and most of the others are engineers, all with graduate studies abroad. Most have been related as students, professors, and deans with Universidad Católica. Thus, Sebastián Edwards knows well the six economists (they studied there in the 1970s and were my students and/or assistants). Most have already long, successful careers in private enterprises and close relations with important NGOs. Quite a cabinet.

Here is one external report.

John Locke in Washington

And for those who managed to liberate their cars from the Snowpocalypse of 2010, another tricky moral dilemma can lead to some volatile confrontations: If you dig your car out from its frozen tomb, do you then own that parking spot until the sun melts open the rest of the curbside space?

Washington's long history of relatively mild winters has left residents without a common sense of snow etiquette to help answer that question.

Boston has codified its citizens' right to benefit from their backbreaking snow-clearing labor; a city law says that if you dig out your car in a snow emergency, a lawn chair or trash can renders the spot yours for at least two days while you're away at work.

From the Washington Post. Hat tip: Donald Marron.

Addendum: Here is Fred McChesney drawing out the general lessons for property rights.

One reason why Germany can’t play tough guy with Greece

In the first year of the German occupation of Greece, austerity and "wage cuts" were imposed on the economy; at least 300,000 Greeks died of hunger.

Here is one contemporary account of that occupation.  The IMF, on the other hand, can't override EU strictures on currency policy and on fiscal policy.

Who then will play tough guy with Greece?

Department of !

Yesterday I read this:

While physicists struggle to get quantum computers to function at cryogenic temperatures, other researchers are saying that humble algae and bacteria may have been performing quantum calculations at life-friendly temperatures for billions of years.

The evidence comes from a study of how energy travels across the light-harvesting molecules involved in photosynthesis. The work has culminated this week in the extraordinary announcement that these molecules in a marine alga may exploit quantum processes at room temperature to transfer energy without loss. Physicists had previously ruled out quantum processes, arguing that they could not persist for long enough at such temperatures to achieve anything useful.

Roger Penrose is now on related points looking more credible.

In my pile

Surrogates

Surrogates, the Bruce Willis movie, disappeared quickly but it was better than I expected, a B- (perhaps they should have called it Avatars).  Worth a Netflix rental if you enjoy scienSurrogates-posterce fiction.  Having said that, what I most liked about Surrogates was that it's clear exactly where it went wrong.  What follows has no spoilers but it won't make a lot of sense unless you have seen the movie.

In the final second of the climax the key choice of the hero is revealed, even though the plot in no way requires this revelation.  It would have been far better to have left the choice ambiguous (think Doubt, Memento and, of course, Blade Runner). Indeed, the script should have been written backwards from the ambiguous choice to all the earlier scenes which justify that ambiguity.  (Some of this material is already in the movie but without the ambiguity of the choice it doesn't resonate, e.g. surrogacy would have saved the son but from early on the Willis character is skeptical of surrogacy thus the character's history provides a reason for him to be world weary but it doesn't drive tension as it should.)

The movie should also have been darker (bizarrely, many scenes take place in brightly lit exteriors).  The best scene is the surrogate "drug" party where the noir element of surface and underlying reality–of things not being what they seem–does come through.  Inexplicably, however, the wife does not partake even though we later learn this would have mirrored her true existence.  

For the choices not taken, Surrogates would be a excellent movie to study in film school. 

“Economists have no clothes”

That's the title of a new, short essay by James M. Buchanan.  Excerpt:

Economists do not really understand what they are doing as they seem forced to make efforts to control aggregate variables that are not controllable in any direct sense. For example, the rate of employment (or unemployment) cannot readily be shifted by governmental mandate. At best, small and peripheral changes may be made while the emergent aggregate generated by the working of the large and complex economy remains stubbornly immune, or worse, to wrongly conceived reform efforts.

Hat tip goes to BookForum.

Derivatives are often disguised debt transactions

Felix Salmon points us to this new Der Spiegel article:

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.

Fictional Exchange Rates

Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.

From what I understand of the Maastricht standards, they are far less stringent than banking regulation, even in places where banking regulation is relatively lax.  Is the premise that governments are more trustworthy and more transparent?  Or is the premise that governments should be allowed to do what banks cannot?

Here is gloss on the Sophoclean chorus on debt; you may need to scroll down to the paragraph on lines 151-58.

From my Inbox

Dear Friend of the Tocqueville Forum,

I regret to inform you that we will postpone the "Are the Suburbs a Mistake" lecture and the Great Encounter with Philip Bess to a later date due to adverse weather conditions.  Apologies for any inconvenience this has caused.  We are eager to host Professor Bess and are working to reschedule his visit for a later date.

All the best,

Dr. Brust